http://www.quantnet.com/forum/ en Mon, 06 Sep 2010 14:15:22 GMT vBulletin 60 http://images.quantnet.info/forum/images/quantnet/misc/rss.jpg http://www.quantnet.com/forum/ http://www.quantnet.com/forum/showthread.php?t=7423&goto=newpost Fri, 03 Sep 2010 16:08:13 GMT Does any one know the specification of the underlying reference bond (hypothetic bond) under the treasure futures for pricing purpose? say, for 10 - year note futures, is the underlying bond for the... Does any one know the specification of the underlying reference bond (hypothetic bond) under the treasure futures for pricing purpose? say, for 10 - year note futures, is the underlying bond for the futures a 10 -year bond with 6% coupon rate or 8.5 - year bond with 6% annual coupon rate? What doe people use to price the futures?


Note that I am asking this question for pricing perspective, not for settlement or delivery practice in which short position is entitled to deliver a broad set of qualified products.

many thanks ]]> Pricing and Hedging zly http://www.quantnet.com/forum/showthread.php?t=7423 http://www.quantnet.com/forum/showthread.php?t=7412&goto=newpost Thu, 02 Sep 2010 08:59:03 GMT There are several stochastic vol models, what I'm studying is Heston. What the paper (written by Heston) studies is European options, but nowadays the popular use of stochastic vol models is to price exotic options, where can I find more information ? Say, an example to price an exotic option with a stochastic vol model. I mean, I don't know where I can get related resources (application of stochastic vol models on options other than European options) ]]> Pricing and Hedging Lun http://www.quantnet.com/forum/showthread.php?t=7412 http://www.quantnet.com/forum/showthread.php?t=7411&goto=newpost Thu, 02 Sep 2010 08:57:24 GMT I want to overcome 2 limitations of BS, they are
1) can't price American options
2) assume no dividend
In the real case, we have dividends, how can we price the option ? use another model or modify the BS ?
Similarly, for American options, use another model or modify the BS ? ]]> Pricing and Hedging Lun http://www.quantnet.com/forum/showthread.php?t=7411 http://www.quantnet.com/forum/showthread.php?t=7385&goto=newpost Tue, 31 Aug 2010 06:19:44 GMT http://homepages.nyu.edu/~sl1544/MonteCarloNulsEn.pdf A quick read (14 pages pdf) for the curious http://homepages.nyu.edu/~sl1544/MonteCarloNulsEn.pdf

A quick read (14 pages pdf) for the curious ]]> Pricing and Hedging Andy Nguyen http://www.quantnet.com/forum/showthread.php?t=7385 http://www.quantnet.com/forum/showthread.php?t=7372&goto=newpost Mon, 30 Aug 2010 10:02:40 GMT We normally assumed that stocks' prices follow geometric brownian motion which is

note that
price of the ith stock at time t

Moreover, I see lots of papers or some textbooks assume that stock index also follows geometric brownian motion.
Hence


Why can we assume that index also follows geometric brownian motion
Because sometimes to compute index we have to readjust the base value like S&P500 to maintain its continuity. This complicate things.

The question is that if there is the prove of index being geometric brownian motion.

Lots of thanks..

---------- Post added at 05:02 AM ---------- Previous post was at 04:44 AM ----------

Base Adjustment
In order to keep the S&P 500 Index comparable across time, the index needs to take into account corporate actions such as stock splits, share issuance, dividends and restructuring events (such as merger or spinoffs). Additionally, in order to keep the Index reflective of American stocks, the constituent stocks need to be changed from time to time.
To prevent the value of the Index from changing merely as a result of corporate financial actions, all such actions affecting the market value of the Index require a Divisor adjustment. Also, when a company is dropped and replaced by another with a different market capitalization, the divisor needs to be adjusted in such a way that the value of the S&P 500 Index remains constant. All Divisor adjustments are made after the close of trading and after the calculation of the closing value of the S&P 500 Index.
From http://en.wikipedia.org/wiki/S%26P_5...ex_maintenance ]]> Pricing and Hedging descendents http://www.quantnet.com/forum/showthread.php?t=7372 http://www.quantnet.com/forum/showthread.php?t=7371&goto=newpost Mon, 30 Aug 2010 09:23:52 GMT I am struggling to come up with a good topic for my master's thesis. I want it to be about pricing an exotic option that is not too difficult to price but at the same time not trivial either (meaning it shouldn't have an analytical expression). I'm thinking of using binomial trees and monte carlo simulation (any other method that is reasonable?) in matlab. ]]> Pricing and Hedging tyskland http://www.quantnet.com/forum/showthread.php?t=7371 http://www.quantnet.com/forum/showthread.php?t=7367&goto=newpost Sun, 29 Aug 2010 12:56:34 GMT I'd like to separate the call/put from a convertible bond and look at it in vol terms.

How does one go about this? ]]> Pricing and Hedging volguy http://www.quantnet.com/forum/showthread.php?t=7367 http://www.quantnet.com/forum/showthread.php?t=7301&goto=newpost Tue, 17 Aug 2010 16:07:36 GMT Hey, just recently joined this community. great job Andy. I am currently trying to understand the business structure of the options MM desk at IB or prop desk. What are the typical turnover rate... Hey, just recently joined this community. great job Andy. I am currently trying to understand the business structure of the options MM desk at IB or prop desk. What are the typical turnover rate of active position for a dealer in days(mid/large cap stocks)?
To what extent vanillas trade OTC? i mean say the client wants to do large size and open interest only covers a fraction of target volume. a dealer may provide direct liquidity to client. if exist are these volumes much larger/smaller than on exchange?
What is the typical structure of the desk? how many names per trader?
thnx for all your answers comments ]]> Pricing and Hedging iHateVariance http://www.quantnet.com/forum/showthread.php?t=7301