Hot answers tagged

3

I would say that $\log K/F$ points towards a log-normal type model. If I were you I would experiment with the moneyness defined as $K-F$ instead. This would make it consistent with normal dynamics. An alternative would be to define an 'interest rate floor', say $L=-200bp$ and take relative changes relative to that rather than zero, ie define moneyness as ...



Only top voted, non community-wiki answers of a minimum length are eligible