# Questions tagged [derivatives]

A financial contract whose payoff is linked to the evolution of an underlying security.

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### Pricing 0% interest rate Floor Black Model

I'm having some trouble pricing a 0% interest rate Floor following Black's formula. The term d1 contains the expresion Ln(Forward/Strike) if the strike is exactly 0 this expresion yields an ...
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### Quantlib: Getting error trying to price a Swap

I have bootstrapped my curve based on end-of-day data for 24th Nov, 2017 I am then using that to price a off-market swap as below: ...
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### How to price up-out-call by solving heat equation like down-out-call

We know that by changing the variables we can obtain the Black-Scholes formula of vanilla call through solving the ...
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### The dice game and derivatives trading

I happened to a interview question: Give a equal dice, you will gain the money which is the number you roll, then how much will you pay for the game. Naturely, the answer is 3.5. But the interview ...
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### Pricing Cancelable swap

Consider a first hypothetical, a swap. Party 1 is paying 6 month Libor, semi-annually. Party 2. pays $1+3*(\frac{Index_\color{red}{T}}{Index_0}-1)$ only at maturity. Say the notional is 1. $Index_t$ ...
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### Refer some most recent books of derivatives pricing by C++

Could you refer some most recent books of derivatives pricing by C++ including Tree method, Finite difference method, Monte Carlo etc. Once I read a series of <...
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### Pricing of Swaption by Proxy and Monte Carlo

here's the problem. Suppose you want to compute the price of a Call option on a Swap contract. Let $T$ and $T+S$ the times (in year fraction) where the Swap lives and suppose that the fluxes of the ...
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### Log-moneyness definition [closed]

Define the time-0 log-moneyness of a call on stock $S$ with strike $K$ and expiry $T$ to be: $$\log(S(0)\exp(rT)/K)$$ What does it mean for the strikes K to be at-the-log-moneyness?? I guessed this ...
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### IVF and implied distribution of underlying in John Hull's book

There is a statement in John Hull's book Options, Futures and Other Derivatives 9th page 633 for the relation between ...
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### Cash as Collateral in OTC Market

In OTC market Collateral Posting as cash is normal, so when it is said Collateral Posted as USD CASH Does that mean Actual amount of currency is posted electronically (or any security is posted) ...
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### How to make the arbitrage if intrinsic value is greater than European call value

It always says if the intrinsic value is greater than European call value, there will be a arbitrage opportunity，but how to construct the portfolio $(S_t - K)^+$ or how to make this arbitrage. By the ...
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### What are good risk management books or docs? [duplicate]

I have an unusual request/question. I was wondering if anyone here could recommend me some books about risk management and equity derivatives. I am about to do an internship as a risk analyst on an ...
170 views

### Replicating a square derivative with calls and puts

I have a derivative that pays off $S_T^2$ at time $T > 0$ with $S_T$ denoting the price of a non dividend-paying stock at $T$. I came across a question about how one can statically replicate this ...
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Here is quanto adjustments in John Hull's book Options, Futures and Other Derivatives 9th ...
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### Zero value of cash flow for future in Shreve's book

Here is the statements of future price in Shreve's book Stochastic Calculus for Finance II page 244 to proof the ...
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### What is CVA (credit valuation adjustment)?

According to Wikipedia, CVA is defined as the difference between the risk-free portfolio value and the true portfolio value that takes into account the possibility of a counterparty’s default. What ...
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### How to measure contango?

Is there any unit of measure for the magnitude of the contango (or backwardation) for futures, so you can compare the contango of many symbols.
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### How to understand closing position of futures

When we want to close out the position of futures prior to the delivery period, you will entering into the opposite trade to the original one. Equivalently, except ...
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### Physical Measure in Weather Derivatives — Hull

In Hull's 8ed., he states in Chapter 33, Energy and Commodity Derivatives, The second part of the chapter considers weather and insurance derivatives. A distinctive feature of these derivatives ...
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### What exactly is a deposit futures contract?

I have been working with Deposit Futures and the Brazilian One-Day Interbank Deposit Future but I can't get my head around them. What exactly is delivered and when? What is the contract a right to?
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### Replicating a portfolio with a certain payoff function

Assume there are two stocks $S_1$ with price $p_1(t)$ and $S_2$ with price $p_2(t)$ where $t$ indicates time. Assume, there is a hypothetical derivative $D$, which is such that, price of $D$ at a time ...
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### How do I modify my basic black scholes model in Excel to price american options?

I've modeled a basic black scholes model in Excel and I have been using it to price European options for backtesting purposes. This has been working fantastically and I would like to adjust this to ...
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### The interpretation of discounted Greeks

I understand that Delta measures the rate of change of the theoretical option value with respect to the change of the underlying asset price. This also represents the number of shares a call option ...
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### Reference for why a derivative is a derivative and not say an insurance contract

I recently spoke to an options trader that tried to demonstrate option pricing by considering a random walk of balls dropping down a lattice so the underlying stochastic process is a simple random ...
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### CDS for Funding

I was wondering if anyone is familiar with how credit default swaps can be used for corp funding and financing. I came across an old case where a bank created a funding structure for a client (asset ...
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### Is there a way of synthetically deleveraging a Real Estate portfolio?

If I manage a Real Estate portfolio with approximately 400 million in debt, which is roughly 50% Loan-to-Value (the properties are worth about 800 million). Is it possible to synthesize a bond ...
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### Pricing the Passport option

Suppose underlying asset $S$ $$dS = \mu Sdt + \sigma Sd W$$ our portfolio $\pi$ consist with $q(t)$ stock $S$ and cash $\pi - qS$...
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### Delta Hedging with fixed Implied Volatility to get rid of vega?

I'm wondering if i should use a floating IV or a fixed IV to delta hedge my options every day. I've read this post but would like different information : Delta Hedging with fixed Implied Volatility ...
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### Why does a futures price converge to a spot price?

I've sort of get the arbitrage logic of it, i.e if the futures price is more expensive than spot price, then investors would short the contract and buy the asset for delivery. Correct me if i'm wrong. ...
60 views