Posted by
Luigi Ballabio on
May 10, 2007; 4:51pm
URL: http://quantlib.414.s1.nabble.com/Black-Scholes-theoretical-value-tp823p826.html
On Thu, 2007-05-10 at 09:19 +0100,
[hidden email] wrote:
> > "or a couple of days later if settlement days should be considered"
>
> Could you give an example to illustrate this phrase?
Yes, I wasn't very clear. And think of it, it's likely that what I wrote
didn't apply even apply to this case...
I wrote out of habit, having worked mostly in interest-rate derivatives.
For such instruments (e.g., deposits or swaps) it is usually the case
(at least in Euroland) that all instruments have a couple of days of
settlement. Since all "today's" payments will actually occur two
business days from today, it is sometimes the custom that such two days
are skipped entirely, and the discount factor is set to 1.0 at the
settlement date---two business day from today's date. In this setting,
there's no discount at all between today and the settlement date, since
those days are modeled out of existence.
But for equity options, the whole thing is probably moot and the
reference date should probably be today's date. I'll leave the answer to
someone more experienced...
Later,
Luigi
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