wilmott.com

Hi
For people familiar with Hull's Example 25.3 (8th edition, the Futures) - would appreciate some advice. I was wondering if there's some information missing in that problem/example....when he writes "when 12, 52, 250 observations are used for the average, the price is 6,...." - I'm not sure what F and sigma to use for these observations. Also, for people who have used his Derivagem software, I can't see where I would even enter that information. What am I missing......?

Are you asking about formulas for discrete forward average price and variance? Here’s the first. The variance derivation takes longer and I just got a parcel from Temu… (Apologies for the low quality presentation.)

Hey @Katastrofa - thanks for the response! No, the derivation is fine...it feels like he left some information out of the question  (the example I posted above) so there was no way to complete the second part of the problem - i.e. when the option starts to fix. Appreciate your help with the derivation....must say...pretty neat handwriting!

OK, just in case, I got approximately the same results as Hull using the calculated first (and second) moment of the discrete average.

Oh cool! What did you use for the "12, 52 and 250" observations? I'm referring to the very last line of the text; where are you getting those observations from? That's the piece that I don't get.....
Would really appreciate if you could share your spreadsheet (if feasible).