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Jakan
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Joined: January 23rd, 2006, 1:58 pm

CMS Spread Options

February 28th, 2008, 7:52 am

Does anybody know what types of models are used in PRACTISE to value and hedge CMS Spread Options?
 
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unkpath
Posts: 289
Joined: January 13th, 2004, 8:44 pm

CMS Spread Options

February 29th, 2008, 1:47 am

market standard is to do an integral of the payoff over a bivariate lognormal distribution. other than that you can do anything you like. check out some of the paper available on the web.QuoteOriginally posted by: JakanDoes anybody know what types of models are used in PRACTISE to value and hedge CMS Spread Options?
 
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Jakan
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Joined: January 23rd, 2006, 1:58 pm

CMS Spread Options

March 4th, 2008, 11:54 am

Could you please recommend some papers?Thanks
 
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manolom
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CMS Spread Options

March 6th, 2008, 3:36 pm

"I do not seek. I find." (Pablo Picasso)
 
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manmeet
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Joined: October 19th, 2004, 6:29 pm

CMS Spread Options

August 9th, 2010, 2:12 am

Is (implied) correlation readily available? Is it stable?From practical standpoint, does everyone use historical correlation? how many days of history is recommended?
 
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Gmike2000
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Joined: September 25th, 2003, 9:49 pm

CMS Spread Options

August 10th, 2010, 3:55 pm

QuoteOriginally posted by: manmeetIs (implied) correlation readily available? Is it stable?From practical standpoint, does everyone use historical correlation? how many days of history is recommended?yes it is, but it is ultimately dependent on your choice of model. the tails of each marginal are very important, so neither sabr nor lognormal are a very good choice. you need to do sth else....and no, there no papers on this topic.
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