ethylene margin collar model dear all :
let us meet early this afternoon .
here is the overview of the model :
1 ) the ethylene margin collars are priced using asian spread option .
the forward curve and volatility curve are provided by the desk .
the correlation between the ethylene and ethylene cost starts from the
historical spot correlation 50 % and grows with the maturity .
2 ) the overall 40 mm payout cap is modeled sepereately .
i fitted the historical spread ( 10 years data ) to a mean reverting model
with stronger mean reverting strength on the floor side . the model
produces
trajectories that are statistically simular to the historical data .
then the expected payoff is computed through simulation .
at the meeting we will discuss the assumptions and present the results .
zimin
ethylene margin collar model
dear all :
let us meet early this afternoon .
here is the overview of the model :
1 ) the ethylene margin collars are priced using asian spread option .
the forward curve and volatility curve are provided by the desk .
the correlation between the ethylene and ethylene cost starts from the
historical spot correlation 50 % and grows with the maturity .
2 ) the overall 40 mm payout cap is modeled sepereately .
i fitted the historical spread ( 10 years data ) to a mean reverting model
with stronger mean reverting strength on the floor side . the model
produces
trajectories that are statistically simular to the historical data .
then the expected payoff is computed through simulation .
at the meeting we will discuss the assumptions and present the results .
zimin