A contract that gives the owner the right, but not the obligation, to buy or sell a security at a fixed price in the future.

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117 views

Derivation of Stochastic Vol PDE

A couple questions regarding stochastic vol PDE derivation. Following Gatheral, a general stochastic vol model is given by \begin{align*} dS(t) & = \mu(t) S(t) dt + \sqrt{v(t)}S(t) dW_1, \\ dv(t) ...
1
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2answers
81 views

European call down and out option (geometric Brownian motion, Monte Carlo, Euler)

I need to estimate the expected value and the Greeks of an European call down and out option, assuming geometrical Brownian motion of the asset, with Monte Carlo simulation employing Euler ...
4
votes
1answer
146 views

Covariance structure of call option surface

Assume the observed call option prices $C(K_i,T_i)$ for $i = 1,\dots,N$ are disturbed by some unknown measurement noise $\epsilon$. What would an appropriate covariance structure be for $\epsilon$? ...
2
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1answer
34 views

Forced to exercise gap options

I was reading a textbook and came across some surprising stuff in the section about gap options. Let $X$ be a payoff function such that $X=\Big\{\matrix{0 \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ ...
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1answer
46 views

Negative adjusted strike in Levy's Asian option approximation?

In Edmond Levy's 1992 paper, he introduced a moment-matching method to approximate the price of an Asian option assuming GBM for the underlying. It suggested that, if some monitor points are already ...
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1answer
103 views

Reuters RIC chain for Eurodollar midcurve options

Can someone please tell me what this is? Thanks. Edit: The RIC for the straight eurodollar options is 0#GE+, I need RICs for the 1,2,3,4 mid curve options which the IMM/IOM calls GE0, GE2, GE3, ...
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1answer
61 views

Feynman Kac Formula for path-dependent options

Consier geometric Brownian motion: $dS_t/S_t=\mu dt+\sigma dW_t$ Feynman Kac theorem tells us that the conditional expectation $v(t,x)=E[ e^{-rT}\Psi(S_T) | S_t=x]$ can be computed by solving the ...
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1answer
94 views

Numerical Solutions for PIDE

I want to solve an exotic options of PIDE by Numerical Methods.I just focus on the integral part of PIDE and want to underestand some tips on numerical solution of how to numerically solve it. Exactly ...
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1answer
58 views

American put option and rising interest rate

Will a rise in interest rate always result in a lower price of an American put option?
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1answer
116 views

In a FX options book, is the sum of P&L equal to the portfolio value?

For a portfolio containing FX options, would the sum of P&L for each option be the portfolio value?
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0answers
59 views

variance ratio for pair-trading

I am using the variance ratio test to check whether my sequence is mean reverting in that test there is a parameter n, How in general I choose this n? or what is the meaning of this parameter? ...
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0answers
47 views

Binomial function use in Bezier smoothing

I am using the Bezier method to smooth option volatility curves, which utilised the binomial distribution. Is someone able to clearly explain the interpretation of the binomial distribution in the ...
0
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0answers
17 views

Principal Protected Notes

I have a few questions on the structuring of principal protected notes. Let's say that the note has a call option on the S&P500 so that it has the following payoff at maturity: $PPN_T=100\% + A ...
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0answers
19 views

How discount TVaR of a put option?

Let say I want to calculate the TVaR of a put option. After I simulated possible outcomes in real-world, how do I discount the outcomes? Is there a difference if I am hedged or not? I tried to use ...
0
votes
0answers
28 views

Price a put option on a CPPI

I want to price a put option on a CPPI using Monte Carlo. I have found so far this article which prices a call on a CPPI. I was wondering if I could use the put/call parity here, and and if so, how ...
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0answers
24 views

Literature on “Risky Risky” Method

Trying to get some information/examples on a method called "risky risky" in the context of equity option/convertible bond valuation.
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0answers
37 views

Impact of Implied skew variations on future prices

I want to test the relationship between of the oil implied volatility skew and oil future prices. I'm lost regarding the method to test the relationship. I was thinking about a regression but I'm ...
0
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0answers
46 views

Complicated American style option contract with numerous non-standard features (simultanous exercise, additional premium, etc.)

I want to value the following contract for times $0<t<T$, i.e. determine $V(t,\cdot)$ where $\cdot$ refers to all other dependences (strike, spot, volatility, etc.). The contract is long and ...
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0answers
57 views

How to value an expansion option?

Fair warning this is help with homework. I am not asking for an answer but some guidance or a formula would be nice. I have absolutely no background in finance and this class is online with no ...
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0answers
48 views

How to generate jump times in in Multilevel path simulation for jump-diffusion SDEs?

I am trying to generate jump times in in Multilevel path simulation for jump-diffusion SDEs using the following MATLAB code: I used following Algorithm in Yuan Xia paper: But I have not reached ...
0
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0answers
96 views

Derivation of the formulas for the values of European asset-or-nothing and cash-or-nothing options

The asset-or-nothing European option pays at t = T the value of the stock when at time T that value exceeds or is equal to the exercise price E, and nothing if the value of the stock is below E. So, ...
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0answers
58 views

European style average price option Delta

I use a numerical method to calculate the value and Greeks of an European style average price option, e.g., with a given volatility, I simulate 1000 random walk price paths find the average value ...
0
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0answers
21 views

Residual maturity vol

The following question is probably (from a practical point of view) more relevant for EM markets which typically exhibit a more pronounced forward volatility compared to spot volatility. Say I buy a ...
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0answers
47 views

Value of a portfolio with a collar option and shares as function of a log return …?

I could use some help with a question I've been stuck with. It's stated as follows, A private investor owns a large quantity of shares of a single stock and is worried about the position being too ...
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0answers
150 views

negative probabilities in the bivariate tree heston model

I am trying to implement the bivariate tree approach for the Heston model by Beliaeva and Nawalkha. I currently have the problem that given the specifications in their examples, I always obtain ...
0
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0answers
106 views

Option payoffs and replicating payoffs

I've come across the below question which has no answers to it and I was hoping someone could provide some help. I know it quite a long question and I appreciate any help with this. An investment ...
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0answers
132 views

“Real” DMA to Options Markets

I'm looking for a broker with DMA to large options markets (CME, ISE, CBOE). Broker should be HFT friendly, i.e. offer fast API, low fees for huge amount of trades and so on. Price is not an issue. ...
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0answers
254 views

CME historical option data provider

Is there any other historical end-of-day CME option data provider rather then CME DataMine? I've searched all the internet and found only CBOE traded options.