Yield based pricing of 100 (and above) strike IR options

vxs · August 25th, 2011, 7:33 pm

Hi All,Given the current rates environment, I see some trades on the 100 strike Eurodollar and Euribor options. There are strikes above a 100 but no volumes on CME that I saw at a quick glance.Pricing these using the price based method gives really crappy risk results, especially when combined a large book of options the rest of which are priced using the yield based method. Anyone know of any method to modify the yield based method to work around this?Thanks in advance!VXS

vxs · August 25th, 2011, 7:57 pm

I am currently using 99.9999 as the strike in yield based method, but am curious about what would be an approach for the strikes above 100.