Questions tagged [forward-start]

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Swaption on Forward-Starting Swap “Replication”?

Lately I was thinking about forward-starting swaptions vs. options on forward-starting swaps a bit, and I started wondering about the following: Suppose we are at time $T_0$ (today) and we want to ...
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29 views

Is the implied volatility different for forward starting caps?

Suppose we know (from looking at an available volatility surface) the implied volatility (flat volatility) of a cap with a maturity of 10 years and strike of 1%. This would correspond to a cap that's ...
2
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0answers
63 views

Multiple max/min forward start option

I want to calculate the price at $t$ for such payoff at $T$ $$\max(S_T,S_{T_0},C),$$ $$\max\left(S_T,\min(S_{T_0}, C)\right),$$ $$S_T -\min(S_{T_0}, C),$$ $$t<T_0<T.$$ Is there any way or ...
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6k views

Skew and shadow delta

The presence of skew causes a correlation between volatility and spot. This correlation produces a negative shadow delta for all forward starting products (forward starting options have a theoretical ...
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1answer
162 views

How to price a forward struck contract today by changing from a $T>T'$ forward measure to $T'$ forward measure at time $t<T'<T$?

Suppose that the payoff of some contract is $V_{T}=S_{T}-S_{T'}$ where $T'<T$ and we want to value the contract at time $t<T'$ (the situation where this arises could be a total return swap, ...
3
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861 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 ?