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From: Jonathan S. <sw...@gm...> - 2022-12-02 12:42:13
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Generally you wouldn't use the Black-Scholes model to price options on calendar spreads because the assumption of geometric Brownian motion is not valid. As a first step, you might consider using an arithmetic Brownian motion, which can go negative. Iain Clark's excellent book briefly mentions this in a footnote on page 13. https://books.google.co.kr/books?id=7vua-0-2sgMC&pg=PT31&source=gbs_toc_r&cad=3#v=onepage&q&f=false There are some Bachelier functions in QuantLib that don't appear to require a positive strike but I haven't used them before, so I might be wrong. Seems like a good place to start though. https://github.com/lballabio/QuantLib/blob/master/ql/pricingengines/blackformula.cpp#L704 For more advanced modeling of this product, you'll probably have to implement something bespoke. On Fri, Dec 2, 2022 at 6:55 PM Ashish Bansal <ash...@gm...> wrote: > Hi, > > I use the Blackscholes engine to evaluate the commodity options. However, > it supports only positive strikes and throws error for a negative strike. > > Now, I wish to evaluate the spread options traded on CBOT: > Consecutive Corn CSO Quotes - CME Group > <https://www.cmegroup.com/markets/agriculture/grains/corn.quotes.options.html#optionProductId=2730> > > How can I evaluate these using Quantlib? Any suggestions on the correct > engine to use which supports the negative strike? > > Thanks > Ashish Bansal > _______________________________________________ > QuantLib-users mailing list > Qua...@li... > https://lists.sourceforge.net/lists/listinfo/quantlib-users > |