# Questions tagged [pricing]

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87 views

### Monte Carlo simulation for OTM options under stochastic volatility

I'm looking to simulate the stochastic price and volatility process (Heston model) using some form of Euler method for Monte Carlo approximation of option prices. The results that I get are acceptable ...
81 views

### Valuation of Corridor Variance Swaps

Given that the payout of the Corridor Variance Swap (CVS) is $V \left(\frac{\sum_{n=0}^{N}I}{T_2 - T_0} (\sigma^2 - K^2) \right)$, where $\sigma^2$ is the realized variance within the pre-specified ...
24 views

### Appropriateness of the Bloomberg CLO Cashflow Generator

Since CLOs seem to gain in popularity because of the COVID-19 crisis, I came across the possibility in Bloomberg to generate cashflows for newly issued CLOs through the function "weighted average ...
6 views

### Per-user pricing / overlapping pricing

I am releasing some educational software that can track student progress. I am having trouble coming up with a good pricing scheme. I do not want it to be too cheap for single users as there is a lot ...
48 views

### How to construct a GBP FVA curve from a USD FVA curve

Our business funds itself in 2 currencies, USD and ZAR. As a consequence we have a USD funding curve. I need to price a GBPZAR cross-currency swap (XIRS) against a counterparty with which we have no ...
47 views

### Price of a double barrier knock-in option

According the paper of Hui (1996) - One-touch double barrier binary option values the price of a knock-out double barrier option is: This option pays out a predefined cash amount if the lower or ...
78 views

### No-arbitrage Pricing

We have a contract whose value is $A(S_t,t) = S_t^3$ at all times, not just at expiration. $S_t$, the underlying stock, follows a Geometric Brownian Motion, $\frac{dS}{S} = \mu dt + \sigma dB$. How ...
124 views

### If I have the present value of an amortizing bond's cashflows, how do I figure out price?

Say that I correctly compute the sum of cash flows of a given bond. How does this relate to the quoted price that most people understand? IE, based on the sum of cashflows I derive a PV of 5,000,000 ...
97 views

### Autocall pricing: what does “Lipschitz continuous parameterization” mean?

I've been reading through this research paper (A Monte Carlo Pricing Algorithm For Autocallables That Allows for Stable Differentiation by T. Alm, B. Harrach, D. Harrach, M. Keller) about a method for ...
212 views

### What book(s) would you recommend for structuring and pricing Exotic Products?

I've been looking for good books on structuring equity derivatives (Principal Protected Notes, Autocalls, Lookbacks, Reverse Convertibles etc). I only found ones that discuss mainly the theoretical ...
40 views

### Pricing of autocallable structured product

I'm looking at this paper: https://doi.org/10.1057/jdhf.2011.25, which is on pricing autocallable structured product. The author uses the Black-Scholes equation to describe the product's dynamic value,...
78 views

### Can arbitrage arguments be rearranged to avoid selling? (Hull, Chapter 5)

Suppose forward contracts are traded on a consumption asset, so there aren't necessarily people ready and willing to sell the asset to jump on an arbitrage opportunity. Suppose the asset has no yield, ...
47 views

### I have missing data on my portfolio weightings but it can be solved through stock prices - how can I code to find this? [closed]

firstly I would like to say sorry for the title - its not the best. In fact its crap. Here is my problem (I am new to coding btw - still learning) I am using Python on my MacBook - using Terminal. I ...
108 views

### Why are some metals in contango (inverted) forward curve and some in backwardation (normal) forward curve?

I am scrolling through the various metals on lme.com and some are in contango and some in backwardation. For example: Copper: backwardation Aluminium: contango Further examination of other metals ...
58 views

### Stocks with same volatility but different drifts

In the book Quant Job Interview Questions & Answers, in section 2, question 2.4 says suppose two assets in a Black-Scholes world have the same volatility but different drifts. How will the price ...
74 views

1k views

### What is the Risk Neutral Measure?

What is the Risk Neutral Measure? I don't believe this has been answered on the internet well and with all the parts connecting. So: What is the risk neutral measure/pricing? Why do we need it? How ...
150 views

### FX Forward rate agreement valuation in quantlib

I am trying to value an FRA in quantlib Python using the below code: ...
126 views

### How to do Fama French (1993) cross sectional regressions? A few questions

I am still relatively new to asset pricing factor models and have a few questions about my current empirical study. I would be very pleased if you could help me. I have created a new factor which I ...
51 views

### Options pricing model inversion

He cited about Roll's compound formula for finding the lead-lag effects between stocks and options. I have a similar data for National Stock Exchange's Index, NIFTY but it's daily, not intra-day. I ...
71 views

### Stock Price as Numeraire, Two Stocks & One Money Market Account

We have two uncorrelated Stock price processes and the classical Money-Market (MM) account. Under the MM Numeraire, both stocks are Martingales when discounted by the MM, as usual. Question: I would ...
419 views

### Numeraire correlated to the traded asset

The Fundamental Theorem of Asset Pricing states that: \begin{align*} \frac{X_0}{N_0} &= \mathbb{E}^N{ \left[ \frac{X(t)}{N(t)}|\mathcal{F}_0 \right] } \end{align*} The usual conditions apply (both ...
158 views

### How to get the price of a bond if the yield is given or viceversa in QuantLib

For example Can u provide with a detailed example please if i have ( maturity, issue date, coupon, frequency, days_countbase, (price or yield) what is the (yield or price given this information. ...
66 views

### Pricing coupon bond on weekly basis effectively

I have a coupon bond with $NV=20 000 000$ and coupon $4\% p.a.$, assumed the coupon is paid annually (I don't have this stated explicitly). Let's assume, the starting date is 27.4.2015, so the first ...
85 views

### Risk Neutral Pricing, a quick question [closed]

I am a newbie. The risk neutral pricing has the following formulation: $$P=\frac{\hat{E(d)}}{R}$$, But the discounted expected value has the formulation of: $$P=\frac{E(d)}{R}$$. The text book ...
90 views

### Double jumps stochastic volatility model (SVCJ, Duffie et al, 2000) - characteristic function for VIX

Currently I am working at my master's degree paper where I want to evaluate VIX options using stochastic volatility jump models.I got some MATLAB codes for the SVCJ model for the S&P, but as the ...
32 views

### Bond New issue swap pricing

Hi Im trying to understand the different part of the pricing of swaps for an issuer who want to swap his issuance, resulting in the swap dealer paying fixed. Im a little confused as to how it works, ...
322 views

### How could Renaissance Technologies have near real-time prices on corporate bonds and other debt? [closed]

Julie Segal, What Renaissance Technologies has that you don't..., Institutional Investor, October 17, 2017. Does this just mean they are aggregating data from vendors like MarketAxess? Or is ...
96 views

### Callable Total Return Swap pricing

I need to price a callable Equity Return Swap by Accrual. ERS has property callable T+1 and I don't get it. Does it mean that when a call happen we fix a price that and pay Accrual the next day? Could ...
77 views

### How to find an arbitrage when the solution is not obvious (2 assets in a market)?

I am struggling to find an arbitrage in the following configuration. I know how to prove that there is an arbitrage (using the fundamental theorem of asset pricing). So I ve proven there is an ...
47 views

### difficulty pricing options using stochastic volatility

can someone kindly explain why it was difficult to obtain an explicit formula for pricing options under stochastic volatility. Thanks alot.
60 views

### Simple application of the fundamental theorem of asset pricing

From what I understood the fundamental theorem of asset pricing (FTAP) details that discounted asset prices are martingales under the risk neutral mesure. As an example: We consider an ATM call ...
76 views

### How to use quantlib Excel for valuation of european swaption with vol surface to calibrate?

I would like to replicate the following Bloomberg pricer in quantlib using Quantlib xl. Is it possible? Thanks
40 views

### Assymmetric Risk Call Option

I'm reading in Radu Tunaru's book "Model Risk in Financial Markets" and he argues that two parties in the ﬁnancial contract do not have the same magnitude of exposure to model risk. The reason for ...
101 views

### how to price options in reality [closed]

I'm getting to know the Black Scholes model, which apparently is no longer suitable for pricing options on the market. I would like to write a Master's thesis on option pricing but I do not know what ...
191 views

### Why is $S(t) = e^{\alpha + \beta t + \sigma W(t)}$ used as a model for prices?

Why is the Geometric Brownian Motion defined as $S(t) = e^{\alpha + \beta t + \sigma W(t)}$ used as a model for stock prices? $S(t)$ has a lognormal distribution which is right skewed. Another problem ...
25 views

### Arbitrage and dominant strategies : Linear Pricing measure

Given a monoperiodic setting, my professor defines that if there is no arbitrage opportunity, it means that there is no dominant strategy. This is clear. However he defines that if there is NO ...
63 views

### How Can I determine Swap rate?

I should calculate a swap rate of IRS contract by knowing that the risk free rate is $r(0) = 0.5$ and the defaultable rate, $r_1$, evolves in discrete time following a 2 period multiplicative binomial ...