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Am I correct in understanding that you have the spot price of Hopper card compute as your underlying and then come up with a pricing equation for some derivativ
by mamonster 3y ago
Am I correct in understanding that you have the spot price of Hopper card compute as your underlying and then come up with a pricing equation for some derivative instruments for that?
- benreesman 3y agoIn a friction free scenario it would be a standard future, yes. The reality is closer to an option on an FX forward, with a very nasty empirical MC as Q* for the payoff equivalence. I’m not fancy enough, I know when to sub-contract!
- mamonster 3y agoHave you tried looking at SABR? If what you have is FX-like I wouldn't be able to help beyond that anyway, FX modelling is its own thing and I haven't done anything there since the obligatory uni courses(in equity space myself). AFAIK the general way to do things in rates/FX is SABR for vanilla and then PDE/MonteCarlo for exotics, but I was never on an FX desk so don't want to point you in the wrong direction.
- benreesman 3y agoAs I’m sure you can tell, pricing exotic derivatives isn’t my day job. But your reminder to think of SABR/implied-vol is useful: I think there’s a convexity argument that can be made around how fat the tails would need to be. I’m not sure anyone is going to be thrilled at “anywhere between one hundred dollars and one hundred million dollars”, but my job is to figure out the bounds.