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Megeve
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Joined: January 20th, 2023, 3:58 pm

Pricing Option with Knock Outs on Realised Volatility

January 24th, 2023, 1:58 pm

Hi,

Does anyone know of any other solution to pricing these other than Monte Carlo?

Thanks!
 
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bearish
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Re: Pricing Option with Knock Outs on Realised Volatility

January 24th, 2023, 9:22 pm

It would be helpful if you could provide a little more info on the contract specs. And, for that matter, the kind of dynamics that you would like to model.
 
Megeve
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Re: Pricing Option with Knock Outs on Realised Volatility

January 25th, 2023, 2:37 pm

For instance say 3 month spx 95% puts with 25 vol knock out on realised volatility.   I have been using DLIB in Bloomberg and was just wondering what else was out there?
 
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Alan
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Re: Pricing Option with Knock Outs on Realised Volatility

January 25th, 2023, 10:16 pm

You might try Gatheral's simple lognormal model
In the lognormal model, given volatility and variance swap prices, the entire distribution is specified and we may price any claim on quadratic variation!