# All Questions

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### Influence of Yield on the Cheapest-To-Deliver bond to honour a short position on a treasury bond futures contract?

In Options, Futures and Other Derivatives 11e by John C. Hull section 6.2 in the subsection 'Cheapest-to-Deliver Bond', the author claims that: A number of factors determine the cheapest-to-deliver ...
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19 views

### Resources to learn derivates [duplicate]

Actually I do follow investopedia but any other tried and tested resources would be helpful.
88 views

### Resources to learn stochastic calculus [duplicate]

I'm looking for a good resource to learn stochastic calculus but I'm not very good at calculus . So could anyone please tell whether the book Stochastic Calculus for Finance by Steven Shreve is a ...
102 views

### Delta of a currency forward contract that price follows Ornstein–Uhlenbeck process

Considering a currency forward contract that matures at time $T$, and its price $F_t$ follows the OU process such that F_t = F_0 e^{-Kt} + a(1 - e^{-Kt}) + \sigma\int^t_0 e^{K(s-t)} ...
38 views

### Stochastic exponential and Girsanov

Let's say I have an instrument $V$ with payoff at maturity: $P(S_T)$ (for example $1_{S > K}$) that I want to price under stochastic rates: $dr_t = \mu dt + \theta_t dW_t$, with $W_t$ a Brownian ...
41 views

### Bond Prices verse Yields [closed]

So maybe this isn't the right place for this question as it could be construed as an open-ended market speculation question the way I frame it, but I am trying to solidify my knowledge in regards to ...
19 views

### Can an American option calendar spread have a negative price?

Consider an American put calendar spread on strike K with maturities T1 < T2. Is the longer-dated put always more expensive than the shorter-dated one? How valid is the following no-arbitrage ...
53 views

### Theoretical pricing models as time to expiry approaches

I was reading Option pricing and volatility by Sheldon Natenburg and in chapter 5 he says the following: “Although traders typically express time to expiration in days, a trader may want to use a ...
85 views

### Black-Scholes formula for currency exchange rates

Exercise 17.6 of Options, Futures, And Other Derivatives by John Hull (Page 397): Show that the formula in equation (17.12) for a put option to sell one unit of currency A for currency B at strike ...
45 views

### Canonical choice of inputs for Black76 model?

What is the canonical choice of inputs (e.g. interest rate, forward price, option price, time to expiration, etc) for the Black76 model? For concreteness let's say on the SPX index. I am using the ...
1 vote
58 views

### Pricing an option on the spread of two contracts, what correlation parameter?

I must price an option on the spread of two futures (A-B) the model I must use uses the IV on the options of each futures. Another parameter I need is the correlation of these, what would be a ...
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### Interest rate to use in black scholes when rates of borrowing and lending are different

I was reading Option pricing and volatility by Sheldon Natenburg and he talks about interest rates and which interest rate to feed to the model. Here is the paragraph from the book(chapter 5): "...
1 vote
107 views

### How to interpret the physical meaning of cointegration vectors of log prices in real world

I'm trying to understand the physical meaning of cointegration vectors of log prices in the real world. For example, if I have two assets $A$ and $B$, and Johansen test gives us a cointegration ...
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### risk-premium if we leave risk-neutral world

Risk neutral pricing in the Black-Scholes-Model makes life easy since it solves the challenge of the choice of two parameters simultanuously: the drift-parameter $\mu$ in the underlying geometric ...
39 views

### Where to find lookback options example？

I am a beginner in lookback options and I want to learn about real-world examples of this type of over-the-counter option. Where can I find practical examples? Thank you very much!
70 views

### Discounting on SOFR/SONIA/Euribor Options

I'm modelling the price of SOFR/SONIA/EURIBOR options on their corresponding futures. Is there a convention or details on whether discounting should take place or not? If there is no discounting why ...
21 views

### Relationship between tenor and portfolio performance

I'm analysing the connection between the tenor of secured loan contracts and loan performance, represented by 30DPD@3MOB and 90DPD@12MOB (dummy variables). I'm using logistic regression, which ...
53 views

### When Is Periodic Profit-Taking Better Than Holding Until Maturity?

I am conducting a comparative analysis of two investment strategies using Monte Carlo simulations: periodic profit-taking and holding the investment until maturity. Specifically, I am simulating price ...
• 482
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### Incremental Variance Estimations on SPX

I am developing a program aimed at estimating the daily implied volatility of SPX using an incremental variance approach. My current methodology involves employing a root-finding algorithm coupled ...
107 views

### Properties of Stochastic Processes : Stopping times [closed]

Consider the probability space $(\Omega, \mathcal{F}, \mathbb{P})$ and the filteration $(\mathcal{F}_t)_{t\geq 0}$ i-e $$\mathcal{F}_t \subset \mathcal{F}_s \subset \mathcal{F}, \forall{t} < s$$ ...
67 views

### How to convert 3M IRS rate to 6M IRS rate without using basis swap?

I have a spot curve where the front-end points (1Y, 2Y) have a fixed/float frequency of 3M3M, while the rest of the points are 6M6M. I want to build a full 6M6M curve. My question is: How can I derive ...
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49 views

### Model for this price dynamic

I would like to know if someone has idea on how to simulate the corresponding price dynamic : The price moves x% hourly on either direction. The maximum the price can move up in a day is y%, and the ...
• 98
40 views

### Intuition behind conversion factors increasing/decreasing for longer dated expiries?

I'm trying to intuitively reason why the below claim from The Treasury Bond Basis is true. Conversion factors are unique to each bond and to each delivery month. Note in Exhibit 1.3 that conversion ...
• 209
99 views

### Signal update frequency and predicting directional return one step ahead

I am trying to get some insights on this specific sort of problem from experienced people, as I do not have much experience in this field. I have a family of features that for simplicity I will just ...
• 105
379 views

### Ratio of real world to risk-neutral density

Suppose I have a risk-neutral pdf and a real-world pdf of an asset. Both functions are related by a scaling factor or the sdf which would transform the risk-neutral into the real-world density, is ...
1 vote
122 views

### Kelly Criterion for finite rounds

I understand that the Kelly criterion maximizes long-term utility under a log-wealth function, but from what I've gathered, this is only true if we have an arbitrarily high number of betting rounds. ...
32 views

### Quantlib Heston MC Discrepancy between methods

I am a newbie at Quantlib (not finance) and am trying to price with the Heston model. I have implemented two different ways to verify the correctness of the Heston path generation to use in a custom ...
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1 vote
42 views

### Pricing option with k-branch binomial tree, risk neutral pricing

Suppose I have a binomial tree with 4 branches, \$14,\$19, \$24, \$28. I have a call option with strike K=20. How would I compute the price of the call option while respecting risk neutral ...
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123 views

### Options on Futures: Estimating implied volatility

In a commodities futures market, where there are options for the terminal expiry, whose implied volatility can be determined, I am interested in understanding what the implied volatility for an early-...
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### Charting software for SOFR future calendar spreads

trying to chart SOFR calendar spreads in TOS, but the wicks are way too long to be accurate. It's showing 50bps swings daily but that isn't right. Are there any alternatives?
37 views

### Why trade credit is considered as an investment

One of the Foreign Direct Investment (FDI) components is debt. I understand that a loan given from a foreign investor to an affiliate company in another country is a form of investment as there will ...
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1 vote
57 views