# Tag Info

### Interpolating option surface while respecting no-arbitrage conditions

I am interested in the same topic. Often you have some kind of stochastic model which you calibrate to fit the option data as closely as possible and then calculate the implied volatility surface ...

### Options market making process (step-by-step)

Thanks for the question and complete answer you two provided. I have some simple questions because they made it hard for me to understand the text compeletely. first of all, what do you mean by "...

### Interpolating option surface while respecting no-arbitrage conditions

Once you normalise properly to remove drift effects and dividends, you will need a convex-decreasing in space and increasing in time interpolation. (basically do in moneyness (to fwd) and not absolute ...
• 11

### Price a forward contract on a zero-coupon bond

A simple way is to think about what this forward contract will allow you to do. Note that the 'forward price' of the asset refers to the price you must pay to purchase the $t_2$-bond at $t_1$, and let ...

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

The third way (continuing the previous answer) is to get some market or consensus prices of the option on the futures price spread (or prices of basket options, if available) and, given implied vols, ...
• 5,123
1 vote
Accepted

### FX Binary Option and differences in prices based on different numeraires?

I've read through the pages where he discusses this a few times. I think the key is this, although I am not 100% sure if I am interpreting his phrases correctly. (Note: All options/payoffs I'm ...
• 704
Accepted

### Numeraire flipping and currency FX options

Looking at the example above after the edits. The short answer is you need to multiply by $K$ as well as the FX rate. For the longer answer: Lets let $D^e, D^u$ be the discount processes in the ...
• 704
Accepted

• 41
1 vote

### path dependency and dollar gamma

What you have in your portfolio is an incorrectly valued instrument. It is misleading to say it is an option, because the option that we understand is that which is priced correctly. When the PnL ...
• 2,521