Questions tagged [derivatives]

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

269 questions
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How would one go about pricing a FX future?

What model/equations would I require to calculate the price for a foreign exchange future? This is in an attempt to mitigate foreign exchange risk. Also, how could one measure a business's exposure to ...
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what are the underlying transactions for SOFR?

Recently I am reading about SOFR (Secured Overnight Financing Rate), which is projected to replace LIBOR to be the reference for risk-free rate in the market. But I still don't understand or imagine ...
106 views

A crash course in pricing

I need to refresh all the pricing theory. Is there anything like a crash course with practical and intuitive explanations? I will provide any further information. I am a mathematical engineer. I am ...
71 views

relationship between notional amounts of volatility swaps and variance swaps

Taking volatility swap payoff as $$( \sigma_F - \sigma_S ) * volatility~notional$$ and Taking variance swap payoff as $$( \sigma_F^2 - \sigma_S^2 ) * variance~notional$$ I am trying to understand ...
37 views

Equal weight correlation swap payoff derivation

I am aware that the payoff for a equal weighted correlation swap is; $$(\rho_K-\rho)*\text{Notional}$$ where $$\rho = \frac{2} {n(n-1)}\sum_{i < j} \rho_{ij}$$ I am wondering how I can derive ...
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Is there Carry Effect for Cash Settled Bond Future

As we know, physical settle bond future would expose carry effect which would be the deliverable bond coupon and your financing cost (cost of carry as a sum term). This is because it can be replicated ...
154 views

Pricing under risk-neutral probabilities for weird derivatives?

I would really appreciate some help to value a weird derivative that I've found in an assignment: $$X=(S_{T_1}-k)^{+} = \max(S_{T_{1}}-k;0)$$ which expires at time $T_{2}$ and uses the price at ...
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Longstaff Schwartz with future conditional coupons

I've implemented the L-S algorithm for a simple put option. I want to value a more complex derivative which has future conditional coupons which only occur if the option is in the money. How would I ...
28 views

Term structure model for exchange-traded STIR futures and their options

As I understand, models such as the SABR extension of the Libor Market Model are the "standard" for interest rate derivative valuation in OTC markets, where options tend to be European and it is ...
36 views

Value of a put > strike?

I dont understand why the value of a put will be greater than the strike. Is this human error? Weatherford had been delisted and the price of the underlying OTC is 0.05 at the moment. Its a 0.50 Put 6/...
71 views

Longstaff Schwartz algorithm

I am new in finance, I have implemented the Longstaff Schwartz algorithm for pricing american otion - one asset (dimension = 1). My questions : Does this algorithm still efficient for a high ...
78 views

Calculate forward discount factors and forward reference rate when discount factors are known

I am trying to learn how to value interest rate swap through portfolio of FRA's(forward rate agreement).But I have got stuck in calculation of floating leg. Here is the scenario as given below for ...
78 views

Volatility smile shows individual Put and Call IV or combination

IV is calculated per strike AND option type basis(for example WTI 50 CALL its x and WTI 50 PUT its y). The question is when its shown in "Smile" its just shown on strike basis, so does that mean lower ...
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Market data for options

Looking for recommendations on places to get market data for options. I'm looking at NYSE and NASDAQ only. My current solution is my broker, Tradeking. I can request realtime data for 700 option ...
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Variance Swap : dividends and rates

In a simplified world you can assume that the var swap is replicated by a continuous set of calls and puts and interest rates are equal to zero. So your PNL is only sensitive to the volatility. But in ...
275 views

Proof Black Scholes Theta

I saw the following proof of theta in a paper I read, and I thought it looked pretty neat. Unfortunately I don't understand the step that they do. This is what they do: Now, I don't get how they go ...
358 views

Is Red Code unique per derivative instrument

Does RED Code (="Markit Reference Entity Database Code") uniquely identify the derivative that has been traded? Is it possible to get a derivative's ISIN code from RED Code?
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Determining cost of carry for a future in Euronext.com [closed]

A snapshot from the trading book of the CAC 40 futures, on November 5 2018, is: Using the book prices, how can I compute the cost of carry implicit in the November and December contracts? Please ...
557 views

Recently in the equity derivatives market there have been some trades on what are known as "Corridor Variance Spreads." The large equity derivative dealers and investment banks have been promoting it ...
114 views

How is the performance measure computed here?

The image is from John C Hull Textbook titled Options, Futures and Other Derivatives ( page 407 - Ninth Edition). The table above was obtained after computing the delta of stock price, shares ...