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by prodiptag
September 6th, 2011, 4:47 pm
Forum: Technical Forum
Topic: shifted SABR model expansion
Replies: 10
Views: 26894

shifted SABR model expansion

<t>Hi All, I would need some pointers to the shifted SABR model expansion. That is, the process of the forward is dF = alpha . F^beta. dW is changed to dF = alpha. (F-S)^beta.dW, where S is the shift (a constant, user defined). The process for alpha remains same. I need the expression for the implie...
by prodiptag
September 4th, 2011, 4:23 pm
Forum: Technical Forum
Topic: Inflation break even curve, Inflation Index simulation help
Replies: 3
Views: 20842

Inflation break even curve, Inflation Index simulation help

yup, these are real world measure
by prodiptag
August 29th, 2011, 1:49 pm
Forum: Technical Forum
Topic: Inflation break even curve, Inflation Index simulation help
Replies: 3
Views: 20842

Inflation break even curve, Inflation Index simulation help

what about a macro/ econometric model that models both the interest rates and inflation, am sure there must be a lot. Also you might want to google "macro-finance" model (most of the work done by Rudbusch I guess), I find that interesting as well
by prodiptag
August 11th, 2011, 11:12 am
Forum: General Forum
Topic: Forward vs Spot Premium Trades
Replies: 23
Views: 27113

Forward vs Spot Premium Trades

<t>well, the thing is these kind of options will sit with the treasury (or other dept that manages collaterals bank-wide), than the individual trading desks. So I would say individual desks has little incentives to implement these exotic things if they do not have any visible (and significant) kick-...
by prodiptag
August 11th, 2011, 10:43 am
Forum: General Forum
Topic: Forward vs Spot Premium Trades
Replies: 23
Views: 27113

Forward vs Spot Premium Trades

<t>ok, in that case seems we both are talking the same things hereon your point of cheapest-to-deliver options, not many on the street I think are pricing it currently, allegedly a couple of biggies. But theoritically, if you are pricing this CTD options (which is basically a xccy basis options), I ...
by prodiptag
August 11th, 2011, 10:12 am
Forum: General Forum
Topic: Forward vs Spot Premium Trades
Replies: 23
Views: 27113

Forward vs Spot Premium Trades

<t>beats me how you conclude !! anyways, to make it more clear -> from dealer's point of view - > the swaption market trades in terms of premiums. if you quote fwd premium (and all agree on vol/strike/fwd) then everyone is at the same page - irrespective of the csa status among them. If you quote sp...
by prodiptag
August 11th, 2011, 8:52 am
Forum: General Forum
Topic: Forward vs Spot Premium Trades
Replies: 23
Views: 27113

Forward vs Spot Premium Trades

is it your imagination or my lack of communication skill, what makes you think I would make same price "regardless of the collateral they post"???
by prodiptag
August 10th, 2011, 4:20 pm
Forum: General Forum
Topic: Forward vs Spot Premium Trades
Replies: 23
Views: 27113

Forward vs Spot Premium Trades

<t>well I think collateral issues always there if you have a csa, but that's treasury's job, from dealers point of view, discounting is the main thing I would say. @doctoc, yes precisely, for fwd premium, the dealer's basis exposure is restricted to the net pnl of the position (swaption + hedges + f...
by prodiptag
August 10th, 2011, 3:59 pm
Forum: General Forum
Topic: short bund, short treasury, long europe equity
Replies: 1
Views: 18893

short bund, short treasury, long europe equity

did you put this trade on? do you have a stoploss?btw theoretically, assuming random walk, and given long enough holding period, and large enough stop-loss, you are guranteed to hit your target one of these day good luck
by prodiptag
August 9th, 2011, 3:55 pm
Forum: General Forum
Topic: USD swap spreads under a new Credit Regime
Replies: 4
Views: 19374

USD swap spreads under a new Credit Regime

so everything they taught us in college about finance was basically wrong , if an entity is downgraded, its issuance is supposed to sell-off!! and alas the opposite happens in reality
by prodiptag
August 9th, 2011, 3:47 pm
Forum: General Forum
Topic: Forward vs Spot Premium Trades
Replies: 23
Views: 27113

Forward vs Spot Premium Trades

<t>I dont have any docs or something, but the basic difference is this -> from pricing point of view, a swaption spot premium is basically Fn(vol, fwd, discount factor), now everyone in the market agrees on the fwd more or less, and vol is the parameter on which trading happens. what complicates thi...
by prodiptag
August 7th, 2011, 6:52 pm
Forum: General Forum
Topic: Beta Guess in SABR calibration
Replies: 4
Views: 22228

Beta Guess in SABR calibration

<t>well, I think both methods have merits, the point is what is the purpose of calibration. If it is for a market making purpose, i would say I would rather have my beta marked at some "reasonable" fixed values and calibrate other parameters, and hope to choose the beta such that my delta hedges are...
by prodiptag
July 17th, 2011, 3:09 am
Forum: General Forum
Topic: Beta Guess in SABR calibration
Replies: 4
Views: 22228

Beta Guess in SABR calibration

<t>Well, I think you are right when you say setting correl and volvol to zero you get a local vol model with alpha and beta. If your estimate beta from this is theoretically ok - depends on how you do it. For e.g. if you use the current smile to fit alpha and beta (if it is possible at all), that wo...
by prodiptag
April 30th, 2011, 5:36 am
Forum: Technical Forum
Topic: help on some kind of "factor analysis"
Replies: 0
Views: 19293

help on some kind of "factor analysis"

<t>this is the thing I have on mind, suppose we have the history of 10y swap rate for the last 5 years. Now I divide this history in to, say, 3m periods (so we have total 20 3m-periods). the objective is to characterize the movements of 10y rate over any given 3m periods. So by analyzing the history...
by prodiptag
April 28th, 2011, 4:10 pm
Forum: General Forum
Topic: cap/floors vs swaptions..
Replies: 8
Views: 28307

cap/floors vs swaptions..

<t>as martinghoul says, the reason vanilla desks are interested in wedge is 1. mostly because it can make money if traded properly, and also 2. some desks might use it for calibration aid to certain points on the surface (usually cap/floor and swaption markets trade differently and usually swaption ...
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