# Tagged Questions

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### Pricing of Interest rate swap with start ex. 01/06/2015 to 03/06/2015 - 2 extra days? Change discount factor and fixed payments?

I hope you can help me. So let say we have an interest rate swap, with the following characteristic: Start in 30/06/2015. End in 02/07/2019 It has fixed payment every year, and floating every ...
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### General Equation for price optimisation where cost is constant

I'm currently working on the Quantitative Finance course offered on Coursera by Wharton and in one example it states that "through calculus, one can obtain the optimal value of price when p(opt)=(c*b)/...
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### what's the difference between Peak-Load pricing and price discrimination?

i just don't get it. Peak-load pricing wiki page gives example: in public goods such as public urban transportation, where day demand (peak period) is usually much higher than night demand (off-...
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### How does financial institutions value European options in practice?

I am a little bit confused, or uninformed more truthfully, regarding how option pricing (Europeans only in this case) are handled in real life. Up to now I have acquired some theoretical knowledge of ...
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### Normalization of Market Data in Time Series Correlation

Suppose we have 2 time series of market data, one for each security and we want to correlate between these 2 securities. My question is How do we handle gaps of missing data in the time series? ...
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### Is there any research for CoCo-Bond in a two factor model?

Basically I am trying to price CoCo-Bond with the AT1P from Brigo. But in the end this isn´t a two factor model. Is there any concret research about this topic? Kind regards, WLS
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### Why does the correlation between r and V in Longstaff and Schwartz 1992 model is positive?

I am reading the Longstaff and Schwartz's 1992 and 1993. From $r = \alpha x + \beta y$ and $V = \alpha^2 x + \beta^2 y$. It was mentioned in the paper that the $r$ is positive correlated with $V$. ...
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### Fees on derivatives

Since it's obviously not at their fair value that derivatives are priced, how do investment banks compute the fees that they add on top of the risk neutral price ?
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### What causes discontinuities with stock prices

With reference to the figure above, why is it that the price at which the stock closed at on monday not equal to the open price on tuesday? Is this discontinuity due to an adjustment in the price to ...
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### Methodologies behind shocking a composite index instrument, what assumption distinguishes these?

Suppose I have a composite index (rebalancing or non-rebalancing) that at present time has some base value $B_{\text{base}}$ in some base economy. I am in the process of shocking the economy on which ...
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### Which interest rate model for which product

Given the multitude of existing interest rate models (ranging from simple to very complex) it would be interesting to know when the additional complexity actually makes sense. The models I have in ...
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### hedging of a spread option with call

We have 2 underlying $S^{1}$ and $S^{2}$ with BS dynamic under the risk-neutral measure (r constant...) I found the (big) PDE satisfied by the price function $u(t,x,y)$ of a call spread whose payoff ...
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### Do FRN's *always* trade on par on reset days, regardless if the issuer's credit quality has changed?

I keep reading that floating rate notes trade on par on coupon reset days. Is this always true, regardless of changes in the issuer's credit quality since the FRN was issued? It seems probably ...
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### How to price this option using the Black Scholes model?

I have a question regarding regular option pricing. In the standard Black-Scholes model, with interest r and volatility $\sigma$, I have to eetermine the arbitrage free price at time $t$ of an ...
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### Turnbull & Wakeman Asian - not Edgeworth?

My understanding is that Turnbull & Wakeman derived an approximation formula for continous arithmetic Asian option using Edgeworth series by matching the first two moments. However, in the book ...