I think I was not clear. First of all, thank you for your contribution. BenjG :Hence, you can use a Black Scholes formula. Is it the fact that you have to consider the risk free rate constant that is incorrect for you ?BramJ : To translate symbolically from the BS DE to the fully margined futures options DE (see Haug section 1.1.4 - but it has a typo - or my notes chapter SAFEX, the SA futures exchange) you set q=r=0 and S=F. For sure , we have to discount since there is no magining , as said in my first post , as said in the thread in nuclear finance, as said by BenjG. Furthermore, Marc Henrard in his paper uses the MM account as numeraire. At the time those papers were written, there was one single curve( except Henrard 's)Now ' Ok let assume a BS model, r constant or not , itis not the problem , but its nature ....what is r in practice ? What should I use to discount ? My OIS curve ? It seems wrong since there is no collateral. That is my problem.In other words : Why should I use OIS discounting in an uncollateralized derivative?If OIS discounting is wrong, How should I discount ? Am I nitpicking cuz I want to include FVA?For BenjG, the final purpose of that is to construct curves considering convexity adjustments. I want to build a 3m libor curve to price derivatives under CSA. You must know that the most liquid instruments must be priced considering the OIS curve and do not have standard cash flow. So the simplest way to get this adjustments is by using a short rate model, so I m doing the inverse of what you talked about. I wanna calibrate my model to Options onfutures to adjust my OIS and Libor curves.
Last edited by MaxwellSheffield
on February 5th, 2014, 11:00 pm, edited 1 time in total.