Questions tagged [pricing]
The pricing tag has no usage guidance.
315
questions
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1answer
130 views
formula for pricing bond-futures
Is anybody able to help me understanding why does $P_t(S)$ appear in the solution to the following problem; deriving the price of bond forward contracts?
Thank you
Given:
$r_t$, the instantaneous ...
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0answers
45 views
Interest Rates Options: can't reproduce market premiums given volatilities and discount curve
I have a range of premiums and normal (Bachelier) volatilites quotes across several strikes and maturities for caps and floors and trying to figure out why I cannot reprice them given the discount ...
0
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1answer
66 views
Multi-stage dividend discount model using financial calculator
Instead of the wrote formula approach, this analyst shows that such problems can be decomposed into their cash flows at different points in time, which enables us to use ...
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0answers
32 views
Can the unique payoff(described in question) be priced with touch/no touch derivatives?
The code below shows how to price a double no touch option in MATLAB:
...
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2answers
126 views
Why can’t delta’s be used to price double no touch options?
Here is the link to a MATLAB one touch option pricing calculator I used:OT
I tried several inputs and I noticed that the one touch option price is approximately twice the delta of an equivalent ...
1
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0answers
77 views
Closed form expression for $\Bbb E(\mathbb{I}_{\{S_{1,T}>S_{2,T}>K \}})$
Is it possible to calculate analytically $\Bbb E(\mathbb{I}_{\{S_{1,T}>S_{2,T}>K \}})$, using the 2-dimensional normal probability function $\Phi_2$, where $S_{1,T}$ and $S_{2,T}$ follow ...
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2answers
221 views
Option pricing using characteristic function
I'm currently on a mission trying to calculate option prices using the rough Heston model. I've found that this is usually done using the characteristic function of the model, but I must admit that I ...
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0answers
74 views
Why would one need forward prices to perform derivatives pricing?
I am trying to understand the purpose of inputs the software of my company is using. Amongst others it needs calibration instruments, a model type, initial values of the respective underylings and a ...
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1answer
59 views
How would I price out and set up a steepening yield curve strategy in which Im long 5yr UST and short 30yr UST futures [closed]
Curious if someone could help me out with pricing this trade idea, or just give me some general tips on a direction I need to head to go about this. I attached a photo if to see how I set up the idea ...
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0answers
86 views
What is the convenience yield of Bitcoin?
Question
What is the convenience yield of the cryptocurrency?
Back-up Explanations
According to the 4-page long research paper, Crypto carry, the widely varying funding rates of perpetual futures (...
1
vote
1answer
122 views
Pricing interest rate derivatives
In Sec. 3.2 here, Mandel deduces the price $P$ of a derivative on an interest rate $r$ obeys a PDE of the form$$\frac{\partial P}{\partial t}+\frac{1}{2}\beta^{2}\frac{\partial^{2}P}{\partial r^{2}}+\...
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1answer
40 views
How to price a set of cashflows from which the buyer can choose one?
Lets consider an arbitrage free and complete Model.Let also focus the analysis on the discrete time setting.Assume you have a finite set of random Cashflows $\mathcal{A}$. That means all elements of ...
3
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1answer
92 views
Bootstrapping discount and forward curve (using ESRA) and price a vanilla swap
I am just starting to use Quantlib, and want to try and replicate the SWPM-functionality in Bloomberg, and price a vanilla 5Y EUR OIS. Below is the overall swap data used in BBG:
Overall settings
...
0
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1answer
104 views
Pricing Dual Currency Bond with Forwards instead of Cross Currency Swap
i got the task to price a bunch of dual currency bonds (EUR/GBP/CHF/USD...) and i am a bit puzzled. As the notional of the bond is in EUR but the repayment is in USD, i assumed that for pricing ...
3
votes
2answers
141 views
Derivation of static replication formula
I know that a way of computing the price of a derivative paying $S^2$ at time $T$ is by making use of the following strategy:
$V=\int_{0}^{\infty} s^2 \frac{\partial^2 C}{\partial K^2}(K=s)ds$
Where $\...
0
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0answers
32 views
Impact of Autocall frequencies on the price
Let's consider an autocall with yearly observation that pays a snowball coupon when the product reaches the autocall barrier.
I am wondering what is the rational of the impact of frequency of ...
3
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0answers
94 views
Is completeness of a financial model relevant for derivatives pricing?
If a market model is complete then every derivative has a unique arbitrage free price. However we are not starting with a model but with a arbitrage free Model class $\mathcal{M}$ (E.g. the ...
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0answers
72 views
Schedule, Yield-to-Maturity, and NPV of Fixed Rate Bond from QuantLib Python
I would like to price a fixed rate bond using QuantLib Python.
The pricing is fine, however I would like to understand how to extract the Yield-to-Maturity (YTM) of the fixed rate bond, that is, the ...
0
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1answer
121 views
Fixed Rate Bond Pricing using QuantLib Python
I have tried to price a fixed rate bond using Python QuantLib and I verified my answer using a DCF model.
Below are my codes for the pricing of the fixed rate bond using Python QuantLib:
...
0
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1answer
209 views
Difference arising between Dirty Price and NPV using QuantLib Python
I have used QuantLib Python to price a fixed rate bond.
My codes are as follows:
...
0
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0answers
70 views
Which curves to use for different swaps?
How do we determine which curve to use for pricing different swaps, for e.g. I don't understand how following come:
Interest Rate Swap (USD)
Fixed: USD Treasury
Floating: none
CCS (USDINR)
Fixed: ...
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0answers
46 views
Pricing of a tracker certificate on basket of index futures
i'm new to Quant Stack Exchange but i already saw that the quality of the answers is outstanding, however, i have a question for which i haven't found an answer yet:
I'm looking for a pricing model/ ...
0
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1answer
51 views
What is 450 pips below spot for USD - JPY currency pair?
I'm new to FX derivatives and I'm trying to price a derivative of USD - JPY pair at 450 pips below spot for USD - JPY. Let's assume that the spot is 109.36; would this mean that 450 pips below spot is ...
0
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1answer
50 views
What is the way to calculate "Risky PV (Present Value)" (discounting including the probability of default) from bond yield curve?
Instead of using CDS spread to do risky discounting, I would like to use the bond yield curve. Can I directly use the discounting factors from the bond yield curve or do I need to figure out the ...
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92 views
Pricing of a barrier reverse convertible in python with monte carlo simulation
I'm a finance student and try to do the pricing of a given barrier reverse convertible. This has to be done by a Monte-Carlo-Simulation in Python.
The underlying is a stock of ING Groep N.V.
Strike ...
2
votes
1answer
74 views
FCFF of a stock and its derivatives
This is the table I have:
I want to use the $FCFF$ to calculate the stock price, when I did this using the $DDM$ I got $£16$ as the stock price.
I've never used FCFF before but I know there are a few ...
13
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2answers
295 views
Why do we need to split market and default information into 2 separate filtrations?
The reduced-form approach to modelling derivatives with credit risk normally assumes the existence of two filtrations:
A market filtration $(\mathscr{F}_t)_{t\geq0}$ carrying market and economic ...
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0answers
39 views
Pricing bonds with different coupon frequencies
Suppose that I have to price a bond that pays fixed rate coupons every three months but all other bonds of that issuer pays coupons every six months. Furthermore suppose that the six months bonds are ...
2
votes
1answer
420 views
Risk Neutral Valuation, Drifts and Calibration
Lets consider a pricing model like Vasicek.
Apparently, if you calibrate a derivatives pricing model to market prices this gives you risk neutral parameters. Its not clear to me as to WHY this will ...
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0answers
48 views
CEV Model Pricing-Implied Volatility Surface
I am trying to validate a local volatility model (Dupire) and I was told to do the following in order to validate it.
With a deterministic model as it is the CEV model, I have to price several options ...
10
votes
2answers
572 views
Differences between main classes of interest pricing derivatives models
There seems to be 3 main classes of interest rate pricing models: 1) Short rate models, 2) Heath Jarrow models and 3) Libor Market Model. My book doesnt seem to explain why we need all these different ...
2
votes
2answers
115 views
multi asset option pricing
Assuming option on each single asset can be priced by Black Scholes, i.e. both S1 and S2 follow GBM. The correlation between vol of S1 and that of S2 is rho. Assuming constant interest rate, no ...
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0answers
32 views
Black 76 and Asian Style Options on Shaped Power Futures
I am attempting to price a monthly lookback option on the gen-weighted average price of power at a particular solar plant over a given month. If the option settles at hub H, am I right to shape the ...
2
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1answer
141 views
Backshifting Price Timeseries with Memory Preservation
In Advances in Financial Machine Learning the author makes a case for fractionally differentiated price returns in chapter 5. The reason is to both maintain memory and to generate a stationary time ...
4
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2answers
226 views
what does the cover page of Guyon and Labordere's Nonlinear Option Pricing represent?
It could be a bit offtopic, but I don't see the link between the contents of the book and the cover page.
Thanks
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0answers
49 views
Valuing an electricity swap
A colleague of mine and I are debating how to price an electricity swap. Keeping in mind that electricity futures are delivered over a period of time rather than at a point in time, I maintain that ...
5
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2answers
255 views
Strategy of replicating a portfolio with payoff $\int_0^T \frac{dS_t}{S_t}$
Given the asset price $S_t$ which is defined as follows
$$\frac{dS_t}{S_t}= r_tdt+\sigma_tdW_t$$
where $r_t$ is not necessarily deterministic.
What is the strategy of replication of the portfolio with ...
1
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1answer
255 views
Pricing of forwards contracts
Of the courses I am taking in college this semester, two are Financial Mathematics and Derivatives. In each course, we learn different formulas to calculate the forward price of a forward contract. ...
2
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2answers
231 views
Quasi Monte Carlo and Brownian bridge (how to combine them)
I am trying to understand how quasi Monte Carlo (QMC) and the Brownian bridge (BB) can be combined to price an asset, but I am having a hard time understanding how. I am just considering a European ...
2
votes
1answer
88 views
COS Method and existence of density
Hey in the COS method we use characteristic function of $\ln{S_T}$ to price european options (by recovering density from characteristic function). But how do we know that density exists? For example I ...
0
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1answer
86 views
Misconception about replicating portfolio [closed]
I am solving a problem in which following payoff is provided:
With $S_0=100$ and $T=8$. Looking at the payoff it seems obvious that it is replicated with two european put options ($K=100$ and $K=150$)...
0
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1answer
52 views
Quantlib error initializing CapFloor C++ Class
I'd like to use QuantLib as a C++ library to price interest rate derivatives, in particular Cap&Floors. To semplify things a little, let's say I have a vector of EURLibor1Y rates for different ...
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0answers
46 views
Why are futures contracts on the secondary market described as having 1 price, instead of 1 price for contract buyers and a 2nd price for sellers?
I'm first going to describe how I believe the futures contract mechanics work, and please correct me where I'm wrong:
A contract seller (in a short position because usually they don't actually ...
-1
votes
1answer
60 views
Delta of a forwards contract
in university's lecture notes, from what I understand using the replication of portfolio principle to price derivates, the forward price of a contract K should be: $K = P_0(1+r)$ where $P_0$ is the ...
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0answers
46 views
Pricing a barrier call option using a copula
Consider two stocks, $S_1$ and $S_2$, with marginal pdfs $f_{S_1}$ and $f_{S_2}$. Assume $F(S_1,S_2)$ is the joint CDF. I'm trying work out a semi-analytic formula for the price of the barrier call ...
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0answers
59 views
Why do I get different results from different credit pricing engines in QuantLib
I am trying to use three credit pricing engines: IsdaCdsEngine, MidPointCdsEngine and IntegralCdsEngine but I am getting different NPV results from each of them. The case is like this: When I have as ...
0
votes
1answer
176 views
No-arbitrage arguments: how do additional fees affect futures on an index?
I am considering a fund that replicates the returns of an index minus a fee, using the following case-study my lecturer used regarding SPY:
In practice, futures and forwards can be written on assets ...
1
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3answers
143 views
Are there really closed-form pricing formulas? [closed]
Good morning to all,
I wanted to post this question here hoping to have more details.
The concern, in my opinion, comes from the fact that the concept of "closed-form" is not clear. Because, ...
1
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0answers
59 views
CMS Convexity adjustment with negative interest rates
I need to price bonds with CMS-linked coupons. In order to determine the convexity adjustment to apply to the forward rates, I would use the formula that appears in Hull's Futures, Options and other ...
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0answers
63 views
Historical data on valuations for internet companies during dot-com bubble
I am looking for data on historical valuations for internet companies during the years of the dot-com bubble (2000 - 2002). I know that big auditors have or at least have access to such data on ...
