Taylor Martin

University of California Los Angeles, CA

mathtm.blogspot.com

I am a recent graduate in applied mathematics at UCLA and currently trying to break into the quantitative investment/trading industry while also continuing to pursue advanced graduate-level mathematics as both a hobby and career necessity.

Mar
17
comment Deposit vs. LIBOR rates? (Bloomberg/SuperDerivatives)
See response to Phil H's answer below.
Mar
17
comment Deposit vs. LIBOR rates? (Bloomberg/SuperDerivatives)
So for example if you go to the terminal and look up USD/RUB Curncy OVDV and go to the tab Dep/Fwd Rates. What is this "deposit rate?" Similar for other currency options/forward contracts in Bloomberg. SuperDerivatives has the same language.
Mar
17
accepted Excel VBA RegEx Using * (asterik) + End-Points to Match Entire String
Mar
17
asked Excel VBA RegEx Using * (asterik) + End-Points to Match Entire String
Mar
16
awarded Scholar
Mar
16
accepted Lease Accounting / FX Embedded Derivatives: How to Value Floor / Cap Optionality Features
Mar
16
comment Lease Accounting / FX Embedded Derivatives: How to Value Floor / Cap Optionality Features
Yes - it's much clearer now. What particularly confused me is that in your framework there is no extendibility to the case of just a floor or just a cap. But it all makes much more sense now.
Mar
16
revised Lease Accounting / FX Embedded Derivatives: How to Value Floor / Cap Optionality Features
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Mar
16
revised Lease Accounting / FX Embedded Derivatives: How to Value Floor / Cap Optionality Features
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Mar
16
comment Lease Accounting / FX Embedded Derivatives: How to Value Floor / Cap Optionality Features
I added an update to my question that tries to combine your logic with my original assessment. I understand what you are trying to say about what is left (the bifurcated lease) being unexposed/riskless and the embedded derivative representing a payout commensurate with that exposure. But I still feel my original proposal for the embedded is correct.
Mar
16
revised Lease Accounting / FX Embedded Derivatives: How to Value Floor / Cap Optionality Features
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Mar
16
comment Lease Accounting / FX Embedded Derivatives: How to Value Floor / Cap Optionality Features
Actually, I think I understand your argument, and I have a feeling it is the similarity in the payoffs of the bear spread and the reverse collar that might be causing some confusion. By my account of the payoffs, there are no FX effects when $S_{t}\notin(\underline{S},\overline{S})$ - the payoff of Short Put ($\underline{S}$) + Short Forward + Long Call ($\overline{S}$) is constant outside this range. Within this range, the payoff comes solely from the short forward contract (the options pay $0$). Payoff from the short forward is only modified (capped/floored) outside the floor-cap range.
Mar
16
comment Lease Accounting / FX Embedded Derivatives: How to Value Floor / Cap Optionality Features
I guess I still don't quite understand your argument. I was under the impression the embedded derivative was like a reverse collar (ssctech.com/eBriefings/eBriefingArticle/tabid/597/…) and that the valuation was supposed to represent the gain/loss of the derivative with respect to the strike (forward curve) at inception. Taking your explanation for granted - how do I adjust for the case where there is only cap or only a floor? And if there is no cap or floor, then I would just value as an FX forward, yes?
Mar
16
awarded Commentator
Mar
16
comment Lease Accounting / FX Embedded Derivatives: How to Value Floor / Cap Optionality Features
Bythe way, thank you for your answer - I don't mean to sound combative or anything. But had one other thing to mention - there are some leases with just a floor and some with just a cap. How would I value those using your framework? It seems clear to me that you need to have the forward in there somewhere to get the correct payoff.
Mar
16
comment Lease Accounting / FX Embedded Derivatives: How to Value Floor / Cap Optionality Features
I'm not quite sure what you mean by "doubling up." Once $S_{t}>\overline{S}$, the payoff is $K-\overline{S}$ (the sum of the call + forward payoff) - i.e. the call's value starts compensating for the forward's loss beyond beyond $S_{t}=\overline{S}$. Similar for the short put/short forward position.
Mar
15
comment Lease Accounting / FX Embedded Derivatives: How to Value Floor / Cap Optionality Features
I'm a little bit confused. If you're correct, then it should be a bear spread (the position loses money if USD/RUB goes up - so the "cap" is really a floor and the "floor" is really a cap). In any event, if I plot the payoffs from the short forward, the long call (with $\overline{S}>\underline{S}$) and the short put (with $\underline{S}$), the net payoff looks like the correct payoff for the embedded derivative. Hence, its value at the time of the cash flow should be the value today, hence valuing it as a long call + short put + short forward.
Mar
14
accepted Excel VBA Slow Calculation Loop Iterations
Mar
14
revised Let $M$ be a bounded subset of the space $C_{[a,b]}$. Prove that the set of all functions $F(x)=\int^{x}_{a}f(t)dt$ with $f\in{M}$ compact.
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Mar
14
comment Let $M$ be a bounded subset of the space $C_{[a,b]}$. Prove that the set of all functions $F(x)=\int^{x}_{a}f(t)dt$ with $f\in{M}$ compact.
I saw "$M$ compact" in the title and made that assumption, which makes the proof $\int M$ is compact trivial because of the uniform convergence norm. But I see now the assumption is that $M$ is merely bounded.
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