Hi all, I'm currently looking at a new type of swaption payoff.  Underlying is a 20year fixed vs float swap on 3m USD LIBOR.  The option is European, and can be exercised 10y after trade date.  However, the strike is not set until 5yrs from the valuation date, and will be set to the ATMF for the swa...

Hi all, Happy New Year.  I'm struggling a little with analytical CVA calculations for FX forwards and options.  Say we have a European call option with strike K on an underlying, S, maturing in T years, then I understand the CVA for the standalone call can be calculated as: CVA = LGD * Cumulative C'...

<t>Hi all,When computing CVA for a vanilla interest rate swap, you can approximate the exposure and by pricing a set of swaptions, weighted by the probability of default in each period.Does this approach apply more generally to other swaps? In particular, I'm looking at long dated zero-coupon inflat...

<t>Hi all,I have a relatively vanilla Knock out FX option. The option has a 1yr maturity, has a strike of 1.35, and knocks out if spot ever falls below 1.2 during the life.I've done a bit of research, and have seen a number of different models recommended - Black Scholes, Vanna-Volga and Heston. I w...

<t>Hi all,Ancast's papers are helpful generally with this question, but just wondered if anyone can shed light on the intuition of the specific Fujii et al derivation?Like Hattusa, I am struggling to understand the a(s) term, particulary:(1) why isn't it constant?, and(2) given that it isn't constan...

<t>Hi all,I'm trying to work out potential bounds for a CDO tranche without resorting to a copula model or anything equally as complex. I've set out some of my thinking below, and would appreciate any comments as whether or not it is sensible. I'm less concerned about an exact value, more the potent...

Hi Owais,For FX, try books by Uwe Wystup.Cheers,Donal

<t>This is actually a really useful book. The topic of derivative accounting under IFRS is generally fairly dull. However, this book gives you real-life, everyday examples that matter, instead of the usual highly stylised examples you see in most accounting literature. I'd say that this book is usef...

<t>Hi all,A very simple question, but I cant seem to prove the answer one way or the other. Your help would be much appreciated.At time t0, I am long a vanilla American option on an equity, with strike X. This option starts at t1 and expires at t2. Is the value of this option the same as going long ...

<t>Hi by1989,The BBG Help desk can sometimes be frustrating. Usually for questions of this nature, I bring up the help screen and before I even type my question I put something like "Can this please be directed to the fixed income quantitative team / expert". This usually avoids the help desk member...

<t>Hi all,I'm stuggling to come up with an answer to the question below. Perhaps I'm thinking about it in the wrong way, and so any advice, pointers to literature etc would be much appreciated.We have a product that pays-off at time T, dependent on the level of an equity. If, at time T, the equity i...

If you put it back then you get your original 100 plus 65% of the basket performance if positive.

<t>Hi all,Currently looking at a structure with a few features which are leaving me a little stuck in terms of how to value. Your thoughts would be much appreciated.Product is an investment in a fund which invests in various equities. You invest 100 in the fund, receive 100% capital protection and p...

<t>Hi all,When reading the standard articles for XCCY swaps (Basis For Change from Risk magazine in the 90s and this), I see valuation against USD roughtly as follows:1 - Choose your funding/ reference/ liquidity currency. Usually USD.2 - Value the USD leg as normal i.e. with normal yield curve / di...

<t>Hi all,I've seen a few deals recently with "Mandatory Early Termination" clauses. What makes these seem strange (to me) is that they have no trigger conditions. For example, there might be a swap maturing in 2020, with a Mandatory Early Termination date of only a couple of months after trade date...