New answers tagged

1

This "proxy" is too approximate, but is an OK first approximation. (By the way, CDX HY is "officially" quoted as price, not as spread.) You need to run the ISDA CDS standard model. You can actually download an Excel add-in, but it would be a more useful exercise for you compile the C++ code. Then you you'll have the "official" ...


3

Just an addendum to the above answers and comments: The main decision is whether to use single or multiple factor dynamics. LMM models term forward rates. HJM models instantaneous forward rates. The main disadvantage of HJM, high-dimensional stochastic process as underlying, was overcome by Cheyette, back in 1994, by restricting the general HJM model to a ...


6

I am not sure if you can classify it like that. Mind you, I never wrote a book. I'll write what I know below and you can decide if the classification makes sense or not. 1 ) STIR: as the term indicates - short term like Eurodollar frequently modelled with Black or Bachelier (normal) model. HW1F is also a short rate model. 2 ) HJM is a framework (M is not ...


2

No difference really if you look closely. Looking at the table, you see delta of a put is negative; delta of a call is positive. To the left of the middle of the chart (50 Delta) you have out the money puts, to he right, out the money calls. Now, delta is associated with a strike. For the same strike, you have ITM calls, if OTM puts and vice versa. In the ...


3

Adding some details: CNY is problematic because it is a nonconvertible currency (that is why user42108 suggests using the offshore yuan CNH instead, or a nondeliverable forward on CNY). See this post Spot/Next and Tom/Next FX forward swaps for more detail about T/N Swaps and how they can be used to postpone delivery of a spot transaction by 1 day (...


2

SGDCNH spot+swap or SGDCNY NDF.


0

Through impulse response function analysis, we find that the offshore RMB exchange rate spread responds to the impact of different economic factors in different degrees and directions: (1) For the offshore RMB exchange rate spread itself, it is positive for the exchange rate difference. The impact is long-term. The disturbance is two-way, with a positive ...


2

The offshore renminbi market is mainly in Hong Kong. The most important offshore renminbi market is a spontaneous market spawned by long-term trade between the two sides. Enterprises' import and export trade activities with Hong Kong and through Hong Kong as an intermediary will naturally produce currency transactions. This currency transaction can be ...


6

Let \begin{align*} \mathrm{d}S_t&=\mu S_t\mathrm{d}t+\sqrt{v_t}S_t\mathrm{d}B_{S,t}, \\ \mathrm{d}v_t&=\kappa(\bar{v}-v_t)\mathrm{d}t+\xi\sqrt{v_t}\mathrm{d}B_{v,t}, \end{align*} where $\mathrm{d}B_{S,t}\mathrm{d}B_{v,t}=\rho\mathrm{d}t$. The market price of risk (or Girsanov kernel or Sharpe ratio) is ${\varphi}_t=\left(\frac{\mu-r}{\sqrt{v_t}},\...


6

I'll give a heuristic "proof" for general European claims which will cause mathematicians to feel sick, but which physicists / practitioners would probably be quite happy work with: Write the Black-Scholes PDE as $$ \frac{\partial F}{\partial\tau}(\tau) = \mathcal{A} F(\tau) $$ with $\tau = T- t$, and the operator $\mathcal A$ is defined as $$ \...


10

Consider any option, vanilla or exotic. In between fixing dates it satisfies the Black & Scholes PDE (for simplicity zero interest rate and dividends) $$ \frac{1}{2} \sigma^2 S^2 \frac{\partial^2 U}{\partial S^2}(S,t)+\frac{\partial U}{\partial t}(S,t)=0 $$ Let ${\cal V}(S,t) = \frac{\partial U}{\partial \sigma}(S,t)$ be the option vega. Differentiating ...


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