# Questions tagged [derivatives]

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

303 questions
Filter by
Sorted by
Tagged with
71 views

### Measuring Medium-term Inflation expectations and real interest rate from OIS and Inflation Swaps

In this speech by Mario Draghi, in section '2:Responding to high unemployment', and subsection 'Boosting aggregate demand', Mario states «Over the month of August financial markets have indicated that ...
145 views

### Is a linear hedge sufficient for most purposes?

I was in a lecture of Bruno Dupire's when he said something along the lines of a linear hedge being sufficient for most purposes. He gave a counter example as well: a corporation producing something ...
13k 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 ...
175 views

### European vs American derivative securities, interesting question

Let us denote by $c^A(t, S(t))$ the price, at time $t$ of a certain American-style derivative security, whose instrinsic value, at time $t$ is denoted by $V(t)$.From the no-arbitrage principle, we ...
528 views

### Why buy/sell a forward starting option?

More precisely, in equity markets, why would one prefer to buy a forward starting option over a vanilla option ? What about the selling side ?
1k views

### Why Must Dividends Be Reinvested to Use Risk-Neutral Pricing?

Assume the price of a stock $S_t$ paying continuous dividend $a$ satisfies $$dS_t = S_t\left((\mu - a)dt + \sigma dW_t\right).$$ The risk-neutral pricing formula states that if $\mathbb{Q}$ is any ...
625 views

### Derivative: Delta of a Down and Out Call Option with Barrier=Debt(K)

I am trying to compute the derivative of this function with respect to V0: This is the price of a down and out call option, assuming the barrier equal to the level of debt K. In other terms, I need ...
1k views

### What is the “inflation delta” of an option?

I'm preparing a report on the different Greeks used in risk measurement, and my boss mentioned the inflation delta within the first-order Greeks (and the Inflation Vega, but I guess that if I figure ...
279 views

### Equivalency of FX forwards and FX fixed for fixed swaps? Are they still the same under multiple curves environment?

I am encountering two approaches for valuation of FX swaps (fixed for fixed, e.g. fixed USD payments for fixed EUR payments) which seem to result into different values although in theory they should ...
4k views

1k views

### What is a standard credit default swap contract and where can I find spread data? What alternatives exist to judge creditworthiness?

I'm doing some work for a company and one of my tasks is to research credit default swaps on banks and to write a page about them explaining what they are and how they're used to evaluate the banks' ...
266 views

### New ways of communicating risk

One of the scapegoats of the financial crisis was value at risk. Still communicating risks effectively to clients is a big challenge and hugely important (also to keep your job as a quant!) In this ...