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3answers
96 views

Why is it enough to know the expected present value of cash flow in risk-neutral framework to price derivatives?

Wilmott book states that its enough to know the expected present value of all cash flow in risk-neutral framework to price derivatives. As I know, to obtain arbitrage-free market we need our ...
0
votes
2answers
52 views

What is a Constant Maturity Swap (CMS) rate?

I have been searching in books and on the internet for a basic definition and explanation of CMS rates, but I cannot find anything clear and simple. Can you explain (maybe with an example) what a CMS ...
0
votes
1answer
72 views

Derivatives (Forex Forward) [closed]

Good day, Please, consult me about Forex Forward Swap (Ex. pair USD/RUB). I am trying to calculate and cant understand, how it works. For example: I have: USD/RUB Fwd points 3M - 19650/19950 IR - ...
0
votes
1answer
75 views

Does presence of arbitrage necessarily make all derivatives have zero value?

Spin-off from: Pricing when arbitrage is possible through Negative Probabilities or something else I mean in a theoretical sense: If we have a particular market model with some fancy assumptions such ...
0
votes
1answer
85 views

Why does increased stock borrow costs decrease a stock's forward price?

The author in this article -- http://streetwiseprofessor.com/?p=7294 -- states that an increase in stock borrowing costs decreases a stock's forward price: In the absence of manipulation, the ...
0
votes
1answer
122 views

Gamma derivation from the expectation

I am trying to derive Gamma from the expectation principle (differentiating under expectation sign). I understand these steps $\frac{d^2 C}{d x^2} = e^{-r\tau} \mathbb{E} [ \frac{\partial}{\partial ...
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votes
2answers
238 views

Why does Futures contract credit and debit a position daily, if it has “locked” the price?

I thought I had understood futures contract. But it seems the daily settlements betray my understanding. Futures contract provides price & product safety to involved two parties. E.g. Wheat ...
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votes
0answers
29 views

NDF Formula for Implied Yield

Good day, I have inputs: Spot Rate USD/UAH - 26.40. Term - 1M Bid 26.90 Ask 27.70 Bid Yield 23.40 % Ask Yield 58.90 % I have no idea how yield is computing, what formula should I use ? Thanks
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0answers
17 views

FFT spread option price

Hurd and Zhou (2010) proposed a FFT-based method to calculate the spread option price. $\Phi$ is the characteristic function of $\log$-return and But I did not implement it successfully. Who has ...
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0answers
41 views

Hedging portfolio of options with different underlyings

Suppose i have call options for 90 of the 100 stocks of NASDAQ100. How can i hedge the risk using NASDAQ futures? Also, how can I get rid of the residual risk?
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0answers
42 views

Calculate Forward Rate under CIP - differs from qouted rates, why?

Hello everyone out there, I am quite new here, but hope you are helping me out, nevertheless. By assuming that we have CIP I want to calculate the 3M Forward rate for EURUSD. I use the known formula ...
0
votes
0answers
47 views

FX rollover swaps rates based on LIBOR rates

I am trying to calculate FX swaps overnight rates based on LIBOR rates Example: Libor rate for TRY crosses is 12.00 Libor rate for USD crosses is .19 How do we get to these number? USDTRY swaps ...
-1
votes
1answer
163 views

Is the code of my binary call option pricer (using explicit finite difference, backward scheme) correct? [closed]

I am using explicit finite difference (backward scheme) to price a binary call option. Here is my MATLAB code: ...
-1
votes
1answer
697 views

Calculating arbitrage- S&P 500 stocks vs S&P 500 Index future?

How exactly would I go about investigating whether the S&P 500 stocks were currently over-valued compared with the price of the S&P 500 Index futures contract? Is it just a case of taking each ...
-3
votes
1answer
654 views

Why do we need derivatives? [closed]

I read somewhere that derivatives are the biggest weapons of financial destruction. Why do we need derivatives? If exploiting risk-proneness of people to make profit is the goal, why don't we stop ...