for empirical option pricing check out Bouchaud's "Theory of financial risk". good book and has a chapter on "hedged MC". i think its a gd starting point. i have implemented it, and it works.
i like two-factor lognormal stoch vol with jumps. "immature market" does it mean there is no bid if SPX craters 100 points? what market are you looking at?
i think his trying to make a shipload of money
not big expert on this. but i use ADO to get data then manipulate it at VBA level and dump on spreadsheet. if u google for ADO u get tons of ref to get u started
usually if you are covered by IB then u can ask ur sales rep. even if u trade other asset class with them. GS and JMP are pretty gd. pretty sure if google a bit for Krag Gregory u will find some strat reports.
Tsotne, as most of this stuff is not liqd as financeguy said i think it makes sense as a theoretical exersise to focus on the dynamics as implied by ur dependence specification than actually matching some price? it would very important for u to understand how these dynamics will ultimately...
relative pricing and replication pricing is not the same thing. sure you can put a level on the 3y zero from the constructed forward curve, then u still need to figure out how to hedge ur position.
if i understood ur question right you would like to replicate cash flows of the 3y zero with coupon bonds. Ideally you want that tennors of the cash flows match. suppose you have:
b1 1y zero
b2 2y 6% coupon annual
b3 3y 8% coupon annual
then holding long 93% of b3 and short 7% of b1 and short...
i think so as well. if poker sites were concerned then in cash games they make everybody play 100bb deep. but i observed that short stacked tables are very active, and a perfect spot to run a bot with minimal postflop play.
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