tx but what is margrabe formula,please?

Hi!I have asset 1 option call price,asset 2 option call price and correlation between asset 1 and asset 2How can I get call option on spread (asset 1 - asset 2)?

Ok !How can I do it if I have a correlation?

How can I create ratio A/B spread option if I have option A and option B separate price?

<t>We have WTI Calendar Swap future contract traded on NYMEXIt is an underlying for APO (Average price options)The swap is built from two months futures prices (for ex., January swap is built from Feb and March contracts)Say,we have ATM volatility for Feb Plain Vanilla options at the level of 32% an...

May be they mean using inverted cumulative normal distribution function (See Haug,"Option pricing formulas,p.30,strike from delta)

<t>QuoteOriginally posted by: spacemonkeyQuoteOriginally posted by: rweinshQuoteOriginally posted by: spacemonkeyQuoteOriginally posted by: rweinsh...If you put a negative volatility(-q) in a call formula you get negative value of put with volatility q...No you don't.Option pricing formulas (Espen H...

QuoteOriginally posted by: spacemonkeyQuoteOriginally posted by: rweinsh...If you put a negative volatility(-q) in a call formula you get negative value of put with volatility q...No you don't.Option pricing formulas (Espen Haug),page 11 or try Excel

<t>QuoteOriginally posted by: Orbitcall the asset f. f=1/S. Let's assume S goes like dS = m*S*dt+q*S*dW (Geometric brownian motion)f_S=-1/S^2 and f_SS = 2/S^3df = f*(-m+q^2)*dt - q*f*dWSo the volatility of S was q, and the volatility of f is -qHTHIt is still interesting that you got the negative vol...

Would you be so kind to explain how?

Guys!What is the volatility of an asset with a price of 1/S if the volatility of S is q?

Does the notion like "correlation between option and its underlying" or "correlation between option and option" exist?If yes,where could I learn about it?

QuoteOriginally posted by: royalflushYou need to contact brokersWhom would you recommend?

Interesting...Thanks a lot May I ask one more?If volatility(implied,ATM) of vanilla suddenly increased,may I assume that either exotic option price( with positive Vega) will rise?

<t>QuoteOriginally posted by: pimpelQuoteOriginally posted by: rweinshQuoteOriginally posted by: pimpelQuoteOriginally posted by: rweinshI understood that...But I am trying to understand how market maker prices those exotics?(for vanilla he may use "wrong number" like implied volatility with "wrong ...