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Mid term exo option pricing
Posted: November 16th, 2005, 6:24 am
by dinner
Hi,I get some market price of exotic options from my trader.As for the short term exo option, I can roughly get the same price by FENICS dvega model.However,for some mid/long term options,say 9 months above, the dvega price starts to be different from market's.Is that mean's the market take some other risk into account? maybe interest rate ? swap point ?thanks a lot..
Mid term exo option pricing
Posted: November 16th, 2005, 10:34 am
by mghiggins
FENICS just doesn't have a terribly good model for this stuff. Not bad, but pretty out of date compared to what the street is doing.
Mid term exo option pricing
Posted: November 23rd, 2005, 11:43 pm
by cpengtoh
Out of curiosity dinner, what ccy pair did you look at when you were testing the dvega model ?
Mid term exo option pricing
Posted: November 24th, 2005, 2:53 am
by dinner
Most are G3 ccys.
Mid term exo option pricing
Posted: November 24th, 2005, 3:54 am
by cpengtoh
USD/JPY is an interesting one where the replication method (as used in dvega) sometimes produces barrier prices very different from the market, even for short dated stuff. This is especially true when the stoch vol boys are calling the shots.