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151 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 ...
20 views

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 ...
34 views

Calendar spread: What are the worst cases?

I am looking to solely make use of the theta decay and trying to overcome the effects of delta and Vega. ​​If, I sell ABC Feb OTM (strike price X) with 3 x 10 = Rs. 30 credit and buy ABC Mar OTM (...
35 views

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 ...
1k views

Why a calendar spread is a preferred strategy in a low volatility period

What is it about a calendar spreadas opposed to other spreads(e.g vertical spread) that makes it such a popular strategy for a period of low implied volatility? Is it that when low volatility turns ...
31 views

Spread options on prices or returns?

I need some clarifications regarding spread options. I have always found them characterized as paying, at maturity, the difference between the prices of two underlying assets: $$(S_1(T)-S_2(T)-K)^+$$...
162 views

How to price a futures spread option?

Let's say I have two futures contract $F_1(0,T)$ and $F_2(0,T)$ on two different correlated underlyings. If I assume that both underlying follow a GBM with volatility $\sigma_1$ and $\sigma_2$ ...
315 views

I am wondering why most online brokers restrict multi-legged options spread trades to have a maximum of four legs? Also, is there a broker that allows you to trade say 6 or 8 legged option spreads.
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IB API quotes and speed

The title says it all. I trade futures options exclusively and wanted to see if anyone had insight into the quote speedsrobustness coming into the API. I'm using the Excel DDE right now just building ...
333 views

Risk Neutral Evaluation - Exchange/Spread Options

I have two assets, $S_1$ and $S_2$, which follow geometric Brownian motion processes. This implies that both $S_1$ and $S_2$ have a lognormal distribution. I'm trying to get the exchange option price ...