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MaxiBestOf


Total Posts: 1
Joined: Jul 2017
 
Posted: 2017-07-05 00:27
Hi everyone, first post here


I'd like to know how to get the implied level of correlation from the IDB's Call vs Call or Put vs Put on a basket of two index (exemple : SPX & SX5E, quoted in €), at a given strike and maturity.

I know I can see the CvC as a call on SPX+SX5E basket, and the inverse position on a vanilla call on SX5E and on a quanto call on SPX quoted in €, hence if i get the price of the two last, get the price of the sole call on basket, and get the correlation from



But that's make a lot of data to collect. Do you know is there's a more direct formula who gives directly ρ from the CvC or the PvP price ?

Thanks in advance

TonyC
Nuclear Energy Trader

Total Posts: 1245
Joined: May 2004
 
Posted: 2017-07-07 18:18
modesty prevents me from quoting the definitive paper concerning options on spreads but you might want to google "commodity covariance contracting"

flaneur/boulevardier/remittance man/energy trader
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