Questions tagged [pricing]
The pricing tag has no usage guidance.
189
questions
1
vote
1answer
24 views
FX Futures pricing formula
I'm reading Paul Wilmott's Introduces Quantitative Finance and stuck a bit with formula $F = S(t)e^{(r-r_f)(T-t)}$ for FX futures pricing. I don't get how to incorporate $r_f$ into the formula, could ...
0
votes
0answers
13 views
is there a specific design pattern in C# to model a yield curve into the NS model?
I successfully managed to have a nice NS model to a yield curve I am studying using R, while I am still beginner in C# I wonder if there is a specific design pattern I should follow in order to put ...
3
votes
0answers
52 views
Pricing eurodollar futures
How are Eurodollar futures priced in practice?
What I already know: The implied 3 Months rate by the futures is 100-price, since it matches the payoff. Using daily LIBOR rates, one should be able to ...
2
votes
1answer
86 views
Overlapping vs Non-overlapping returns
Suppose I want to estimate the following regression: $R_t=\alpha + \beta X_{t-1} +\epsilon_t$. Where I use asset returns as the dependent variable. Both overlapping as well as non-overlapping returns ...
0
votes
1answer
146 views
Pricing of a swap [closed]
I'm trying to find the fixed rate of a swap that would give me a net PV of 0 at valuation.
We have swap pricer at work and I'm to see if I can match the number from it when I build my own pricer, as a ...
3
votes
1answer
74 views
Problem at deriving Bachelier formula with interest rates
In the Bachelier model, I have difficulties with a certain step. I want to figure out the distribution of $S_T$, which is the price process in the Bachelier model.
So far I could state that ($\mathbb{...
4
votes
1answer
76 views
Equivalence of Put Pricing Formulas
I have to show that:
\begin{equation}
P_{t,T}(K)=e^{-r(T-t)} \int_0^{\infty}\left(K-S\right)^+ q_T^S(S)dS
\end{equation}
is equivalent to:
\begin{equation}
P_{t,T}(K)=e^{-r(T-t)}\int_{-\infty}^{...
2
votes
1answer
74 views
Black's Approximation - Discrete dividend for Put Options
I am currently trying to price and option chain for dividend paying stocks (american style exercise).
I am able to calculate the Net Present Value (NPV) of dividends until maturity and then apply ...
2
votes
1answer
52 views
Difference between modelValue from HestonModelHelper and NPV() from VanillaOption
I am trying to calibrate an Heston model and price vanilla option using Quantlib 1.15 and Python 2.7.
I use the following code
...
0
votes
2answers
120 views
Efficient market hypothesis vs random walk
I am having trouble to understand the distinction between the EMH and random walks.
If I understand correctly, the EMH states that all available information is incorporated into prices, which ...
1
vote
0answers
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 ...
0
votes
1answer
67 views
Is there an asset pricing model that actually works? Can you point me to research that test APMs?
As far as I know there is no APM that is able to explain all stock market anomalies. However, my search for papers empirically test a set of widely accepted APMs was not very successful. I would like ...
1
vote
2answers
82 views
CDS, default probability and bond price
When we calculate the implied default probabilities from CDS, can we use that information to price bonds?
I am getting familiar with Fixed Income. I saw textbooks using implied default probabilities ...
1
vote
0answers
20 views
Pricing a transfer option for oil
Need some input in how to attack this problem. Given are 8 timeseries:
UK Oil price, Delivery Quarter 1 2020
UK Oil price, Delivery Quarter 2 2020
UK Oil price, Delivery Quarter 3 2020
UK Oil price, ...
1
vote
1answer
29 views
Transactional costs for shipping in % based on futures market price
Real case: Imagine I want to move an oil for one terminal to another.
I have about 20 +/- tanker companies, but all of them have max capacity on their top deadweight (DWCC) vessel about ...
0
votes
1answer
67 views
pricing deliverable vs non-deliverable fx forwards
I am trying to link these two questions together
Pricing a regular FX forward
This is a contract (say USD vs JPY) where you exchange 2 currencies at maturity at a pre-determined rate, while no ...
3
votes
1answer
165 views
Pricing a callable bond
I have read the Lehman Brother's paper on OAS which I mostly understand, they outline how to find the OAS for a callable bond of which the formula is effectively (ignoring refinancing costs):
Market ...
1
vote
0answers
17 views
How to calculate/estimate CLV for our odd subscription-based business model [closed]
I'm working on a school project where I and other group members come up with a business idea and write a paper containing all necessary information about the business, like the business model, revenue ...
0
votes
1answer
100 views
How to quantify the coupon effect?
I'm reading Moorad Choudhry's book "Advanced Fixed Income Analysis"
The first chapter briefly touches on the coupon effect which I understand from other sources is the effect of pricing an annuity (...
5
votes
1answer
117 views
Pricing in the Heston Model
The dynamics of the Heston Model is
\begin{align*}
\frac{dS}{S} & = \lambda \sqrt{\nu} d W^S \\[0.5em]
d \nu & = k (1- \nu )dt + \epsilon \sqrt{\nu} dW^\sigma
\end{align*}
where $\lambda$...
2
votes
2answers
190 views
Application of Itô's lemma - Forward process
How would be applied the itô's lemma in the following equation:
And we know that:
1
vote
1answer
151 views
Bond discounting conventions
during the preparation for my thesis, I've come across some strange discrepancies between literature and the information I've been taught.
It comes down to the proper way of discounting cash-flows of ...
1
vote
0answers
48 views
Preferred Stock pricing model
I am trying to build a model to price a preferred stock. I want to model the dividends as random payments. I can't find any papers online on the subject. Does anyone have a reference for me?
3
votes
1answer
95 views
Why Quantlib Option NPV does not change when repricing?
Trying to learn Quantlib with Python, please have a look at below code:
...
2
votes
1answer
77 views
Which methods are there to determine the price of futures contracts?
Which method apart from the cost of carry model exists, and which works best in real life? How does the market expectations impact on the futures price?
1
vote
0answers
43 views
FX Average Forward Pricing
Lookin for documentation on how to price FX Arithmetic Average Rate Forwards.
Couldn't find any info on textbooks.
Any help is very appreciated.
1
vote
2answers
110 views
ETF Replication
I have a question regarding the ETF replication methods. I know there are two main methods, namely physical and synthetic replications, but I would like to understand how an ETF trader can :
...
2
votes
1answer
86 views
Getting rate from a share's given futures price, with known dividend information
Question was answered by @Ezy - thanks!
This seems to be a basic question, but mysteriously unsolvable as far as I can see.
It concerns calculating the interest rate from a given stock futures ...
2
votes
0answers
29 views
About buying and selling a cumulative parisian options
I ask my question here because I want to know more about the cumulative Parisian options introduced by M. Chesney, Mr. Jeanblanc-Picué and Mr. Yor in 1997, then developed by Hugonnier in 1999 and F. ...
0
votes
1answer
103 views
VXX Put pricing
Last week at Friday's close, the Dec 14 37.5 Put options were selling for \$.68 with VXX at \$40.29. This week at Friday's close, the Dec 21 37.5 Put options were selling for \$.38 with VXX at \$40.50....
1
vote
1answer
54 views
Levy process and random measure
I am wondering if random measures are used under a Levy process and how this connects to finance (particularly pricing). Any paper or books for suggestions is welcomed.
0
votes
1answer
122 views
What is the value/price of a bond paying floating rate
I am going through J.C.Hull for swaps. Where he says we can value a swap using bonds. Let $B_{fl}$: value of floating rate bond, $L$ notional principal. Why is $B_{fl} = L$ just after a payment ? What ...
0
votes
2answers
364 views
Hedging with machine learning
I’ve been thinking about an interesting problem lately: Suppose I have a position in an exotic derivative. How can I automate the hedging process?
Traditionally, one build a pricing model and ...
0
votes
1answer
51 views
What discount rates should I use to price municipal bond with unknown market price
I have a payoff structure but I do not know the price of bond. The bond is municipal. What discount rates should I take for each period in order to calculate its fair price?
0
votes
1answer
210 views
Basic Replication of European Call Option
I am looking at the very basics of replicating an option with a portfolio of risky and risk free assets. As such we can define a portfolio of $x$ no. of shares, $y$ bonds & $z$ options at time $(T)...
0
votes
1answer
78 views
Spreadlock derivatives
I would like to price a spreadlock forward swap and a spreadlock swaption but I don't find in the web any research article. Would you please provide me with some freely accessible papers on the web ? ...
0
votes
0answers
48 views
Antithetic sampling on non-linear payoff?
If I wish to price an option with Monte Carlo using the standard GBM process, which have payoff
$(max(S-K,0))^2$
Why is it not suitable for a non-linear payoff?
0
votes
1answer
180 views
Question on volatility equation for CMS pricing
In "Full implications of CMS convexity (Cedervall and Piterbarg, 2012)", a.k.a. "CMS: covering all bases (idem)", the authors develop a CMS model equipped with an annuity mapping function which ...
2
votes
1answer
202 views
Kirk Approximation and Exercise Probability
I have a question about spread options.
I'm pricing a put option on two assets, with a strike value of 0:
$max(K-(F_1-F_2);0)=max(0-(F_1-F_2);0)=max(F_2-F_1;0)$
I know this kind of options could be ...
4
votes
1answer
2k views
What is the importance of alpha, beta, rho in the SABR volatility model?
I just read that SABR model is a stochastic volatility model, which attempts to capture the volatility smile in derivatives markets. The name stands for "stochastic alpha, beta, rho", referring to the ...
1
vote
0answers
31 views
amount of data - option pricer calibration
A practical question. When you calibrate an option pricer (whatever the model is), do you use data from several days or just one day (last trading day)? I noted some papers use data from one single ...
0
votes
0answers
27 views
How is this steel price implied based on enterprise value-to-Ebitda?
How was the steel price of $650 per ton calculated based on the forward-looking enterprise value-to-Ebitda in this Bloomberg news article?
https://www.bloomberg.com/news/articles/2018-03-23/tariff-...
-1
votes
1answer
85 views
Where can I find free security and derivative pricing software?
I am looking for a free derivative valuation software that can compute value and sensitivities. It should be easy and straightforward to use, e.g., I can get results by supplying market data and trade ...
2
votes
0answers
499 views
Multi-currency CSA discounting curve construction
I have a number of eur/usd and gbp/usd MtM Basis swaps that are collaterized in USD. For the non-usd legs I'm constructing the muti-ccy csa discounting curve. Im using forwards for the short end of ...
0
votes
1answer
166 views
Confusion in forward contract pricing on a stock using the binomial model
In the financial engineering course I am taking we are studying how to use the binomial model to price derivatives, one of which is the forward. For this question it is related to a forward contract ...
1
vote
1answer
1k views
Pricing a double barrier option using Monte Carlo (C++ & Python code included)
I'm trying to price an option with upper and lower barriers using MC where the payoff is $B_u$ when $S_t > B_u$, $B_l$ when $S_t < B_l$ and $S_t$ when $B_l < S_t < B_u$.
I have written ...
0
votes
1answer
43 views
How to work out bond price given other bond prices?
I'm stuck on the following problem from a financial maths course, and was wondering whether anybody would be able to help me. I don't really know where to begin.
The following risk free bonds are ...
4
votes
1answer
265 views
Exposure calculation of a re-coupon swap
How to calculate the exposure of a recoupon swap (when the MTM of an i.r. swap is settled and the fixed rate is reset to the prevailing swap rate for the residual maturity).
It's used to reduce the ...
1
vote
1answer
334 views
Bootstrapping Quantlib RateHelper Python/C++ [closed]
I am pretty new in the Quant areaa and using Quantlib. I found the pretty good introductions concerning bootstrapping in the book QuantLib Python Cookbook by Luigi Ballabio. I wanted to understand the ...
1
vote
1answer
263 views
Call option Delta
I have an exercise where I need to show that the prices of call options $ C(t,K)=E((S_t-K)^+),t \in [0,T]$ with Strike $K$ for fixed $t$:
$$\frac{\partial ^+C(t,K)}{\partial K}=-P(S_t>K).$$
We ...
