# Questions tagged [payoff]

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### YYIIS Inflation swap chapter 16 of Brigo's text

Are there errata in the Brigos's text of Interest Rate Models in chapter 16 when it is defined the YYIIS payoff? In formula (16.3) is defined Party A's payoff as: \begin{align} \\ N\psi_i\left[\frac{I\...
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### Pathwise sensitivities of American options - Derivative of the American payoff function

How can I compute the derivative of the payoff function for an American put option? In the paper "Smoking adjoints: fast Monte Carlo Greeks" by Giles and Glasserman (2006) they compare two ...
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### Why is the parity graph in Natenberg shifted up?

In chapter 4 of Natenberg's "Option and Volatility and pricing", he discusses how to draw parity graphs for option positions. These are defined as a plot of the intrinsic value of the ...
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### Swap Fly PnL Payoff Question

Stuck on this payoff question. What is the PnL on 5s10s30s on a swap fly 10k 01, where the fly moves 8 to 26bp? Any ideas would be much appreciated.
1 vote
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### Calculating CDO pay-off

Background I got a model for the distance-to-default of an instution in a system of banks from the paper "An SPDE model for systemic risk with endogeneous contagion". Therein they postulated ...
1 vote
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### Why should a seller of autocall (down out ones) cover gamma risk?

I wonder why sellers of Autocalls should cover the gamma ? The autocall I'm talking about is of this type : While the spot never goes below 70 % of the initial value, nothing happens. If it happens, ...
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### Discontinuous derivative payoff approximation

Consider a derivative of digital type which pays this kind of payoff at time $T$: \begin{align*} g(S_T,k) &= \begin{cases} P_0,~S_T>k \\ S_T, ~S_T\leq k \end{cases} \end{...
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### Construct a portfolio of European call options with a certain payoff function

My question is similar to Replicate a Portfolio with Given Payoff but I am not quite sure how to apply this to my problem. A portfolio of European call options on an asset $S_T$ has a payoff function ...
686 views

### Architecture of a global pricing library with immutable payoffs

By global pricing library I mean a library handling equity, rate etc, hybrid products having several models (BS, LV, SV, LSV) having several numerical methods (analytic formula, MC, PDE FD/FE) I ...
1 vote
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### Swaption Corridor Payoff Diagram

What does the payoff diagram look like for a long payer swaption corridor? For example, suppose that I am looking at a long-payer $1 \times 10$-year swaption with 10Y swaps as the underlying. If I ...
1 vote
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### Finding optimal drift, importance sampling, least square monte carlo

I am working with Importance sampling for Least Squared monte carlo and have now problems understanding the implementation of the Robbins-Monro algorithm for finding the optimal drift for finding ...
1 vote
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### Differentiating a Payoff

Okay this is probably going to be an extremely easy/straightforward question but I thought I should post it here just to double check. Suppose I have a payoff $\Phi = (S_{T}-K)^{+}$. Now let's say I ...
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### "For any random variable $X$, someone will be willing to buy and someone to sell a financial instrument, whose final payoff is $X$."

we will assume that for any random variable $X:\Omega\rightarrow\mathbb{R}$, some investor will be willing to buy and some investor will be willing to sell a 'financial instrument' whose final payoff ...
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### conservative approach payoff table

With the conservative approach, we choose the decision which maximises minimum payoff. I was wondering which decision is chosen if 2 decisions have equal minimum payoff (which is the maximum)? ...
Settings Let you're trading a security whose probability to be equal to $S_{T}$ at time $T$ follows a p.d.f. like the ones in the picture below. (That is just an example found with Google images, ...