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Re: [Quantlib-users] [EXT] Re: Query on Calendar spread options
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From: Philippe H. <phi...@ex...> - 2022-12-02 13:24:19
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<html><head><meta http-equiv="content-type" content="text/html; charset=utf-8"></head><body dir="auto">How about shifted log normal?<br><br><div dir="ltr">Regards<div><br></div><div>Philippe Hatstadt</div><div>+1-203-252-0408</div><div><br></div></div><div dir="ltr"><br><blockquote type="cite">On Dec 2, 2022, at 7:54 AM, Ashish Bansal <ash...@gm...> wrote:<br><br></blockquote></div><blockquote type="cite"><div dir="ltr"><div dir="ltr">Thanks a lot Philippe and Jonathan for the help. Really appreciate it.</div><br><div class="gmail_quote"><div dir="ltr" class="gmail_attr">On Fri, 2 Dec 2022 at 18:12, Jonathan Sweemer <<a href="mailto:sw...@gm...">sw...@gm...</a>> wrote:<br></div><blockquote class="gmail_quote" style="margin:0px 0px 0px 0.8ex;border-left:1px solid rgb(204,204,204);padding-left:1ex"><div dir="ltr">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.<br><div><br></div><div>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.</div><div><br></div><div><a href="https://books.google.co.kr/books?id=7vua-0-2sgMC&pg=PT31&source=gbs_toc_r&cad=3#v=onepage&q&f=false" target="_blank">https://books.google.co.kr/books?id=7vua-0-2sgMC&pg=PT31&source=gbs_toc_r&cad=3#v=onepage&q&f=false</a><br></div><div><br></div><div>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.</div><div><br></div><div><a href="https://github.com/lballabio/QuantLib/blob/master/ql/pricingengines/blackformula.cpp#L704" target="_blank">https://github.com/lballabio/QuantLib/blob/master/ql/pricingengines/blackformula.cpp#L704</a><br></div><div><br></div><div>For more advanced modeling of this product, you'll probably have to implement something bespoke.</div><div><br></div></div><br><div class="gmail_quote"><div dir="ltr" class="gmail_attr">On Fri, Dec 2, 2022 at 6:55 PM Ashish Bansal <<a href="mailto:ash...@gm..." target="_blank">ash...@gm...</a>> wrote:<br></div><blockquote class="gmail_quote" style="margin:0px 0px 0px 0.8ex;border-left:1px solid rgb(204,204,204);padding-left:1ex"><div dir="ltr">Hi,<br><div><br></div><div>I use the Blackscholes engine to evaluate the commodity options. However, it supports only positive strikes and throws error for a negative strike. </div><div><br></div><div>Now, I wish to evaluate the spread options traded on CBOT:<br><a href="https://www.cmegroup.com/markets/agriculture/grains/corn.quotes.options.html#optionProductId=2730" target="_blank">Consecutive Corn CSO Quotes - CME Group</a><br></div><div><br></div><div>How can I evaluate these using Quantlib? Any suggestions on the correct engine to use which supports the negative strike?</div><div><br></div><div>Thanks</div><div>Ashish Bansal</div></div> _______________________________________________<br> QuantLib-users mailing list<br> <a href="mailto:Qua...@li..." target="_blank">Qua...@li...</a><br> <a href="https://lists.sourceforge.net/lists/listinfo/quantlib-users" rel="noreferrer" target="_blank">https://lists.sourceforge.net/lists/listinfo/quantlib-users</a><br> </blockquote></div> </blockquote></div> <span>_______________________________________________</span><br><span>QuantLib-users mailing list</span><br><span>Qua...@li...</span><br><span>https://lists.sourceforge.net/lists/listinfo/quantlib-users</span><br></div></blockquote></body></html> <br> <p dir="ltr" style="line-height:1.2;margin-top:4pt;margin-bottom:0pt"><span style="font-family:Arial;background-color:transparent;font-size:9pt;color:rgb(0,0,0);vertical-align:baseline;white-space:pre-wrap">Broker-Dealer services offered through Exos Securities LLC, member of </span><a href="http://www.sipc.org/" style="font-family:Arial;font-size:medium" target="_blank"><span style="font-size:9pt;color:rgb(17,85,204);background-color:transparent;vertical-align:baseline;white-space:pre-wrap">SIPC</span></a><span style="font-family:Arial;background-color:transparent;font-size:9pt;color:rgb(0,0,0);vertical-align:baseline;white-space:pre-wrap"> / </span><span style="font-family:Arial;background-color:transparent;font-size:9pt;color:rgb(17,85,204);vertical-align:baseline;white-space:pre-wrap"><a href="http://www.finra.org/" target="_blank">FINRA</a></span><span style="font-family:Arial;background-color:transparent;font-size:9pt;color:rgb(34,34,34);vertical-align:baseline;white-space:pre-wrap"> / <a href="https://brokercheck.finra.org/" target="_blank">BrokerCheck </a>/ 2022 Exos, inc. 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