Quantitative Finance Asked by Mercadian on October 27, 2021
Context:
Most emerging/frontier markets have no or very thinly traded volatility surfaces for their equity markets (single name and indices alike), furthermore, they usually have restrictions on Short-Selling and Capital Controls
Question:
How would you approach pricing/EoD MtM for simple european calls/puts in this market conditions? I’m interested in the heuristics/thought process, any practical experience and any literature.
What I’ve got so far:
Thx!
M
Tags
I think your list covers the approach quite well. What I would add to point 3(i) is that there is a (generally positive) spread of implied vols to realized vols. In this case what might be useful is to combine point 2 with point 3(i) i.e. ascertain the implied/realized spread from the proxy market and apply that to the realized vol obtained from your historical underlying data.
Answered by user35980 on October 27, 2021
Get help from others!
Recent Questions
Recent Answers
© 2024 TransWikia.com. All rights reserved. Sites we Love: PCI Database, UKBizDB, Menu Kuliner, Sharing RPP