Questions tagged [forward-start]

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Price of a forward delivery bond - Quantlib python

I would like to find the bond price today which has already been issued but delivered later. Basically, the price won't include some of the coupons till the delivery date. Let's say 10 year bond ...
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1answer
135 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 ...
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1answer
144 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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91 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
256 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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60 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 ...
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66 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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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 ...
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1answer
170 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, ...
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1answer
993 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 ?