Questions tagged [forward-start]

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117 views

Show that a forward starting option has 0 delta, and no sensitivity to volatility until the strike is determined

I need to show that the payoff: $([(S_{T2}-S_{T1})/S_{T1}]-k)^+$ a. Has 0 delta b. Has no sensitivity to quadratic variation of the underlying till $T_1$ Additionally, I would like to know for what ...
2
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1answer
131 views

Question about pricing forward start option with Heston Monte Carlo

I'm trying to price a forward start option with payoff $\Big(\dfrac{S_{T_2}}{S_{T_1}}-1\Big)^+$ with Heston Monte Carlo. Heston Model: $$ dS_t = rS_tdt + \sqrt{v_t}S_tdW_t^1$$ $$ dv_t = \kappa(m-v_t) +...
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0answers
90 views

Price of Interest Rate Swap (Float-Float)

Let say I have 2 Forward start Float-Float Interest Rate Swaps starting in 1 year and 2 years and both have 5 years of life. I know the prices of both these swaps say $P_1$ and $P_2$ Given this ...
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1answer
239 views

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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0answers
58 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
65 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 ...
0
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1answer
7k 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 ...
0
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1answer
168 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
votes
1answer
979 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 ?