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It's all about the soft line in the sand drawn by the SNB... I thought it would come at 1.44, but it was not meant to be.

I don't really understand what you're trying to achieve here, nitro... If you're trying to say that vol is unknowable and unquantifiable (i.e. an "unknown uknown" using Rumsfeld-speak), I won't disagree. However, it's an impractical attitude, as it means we should all go home now and stop...

As I have mentioned to you before, nitro, it's all been done already. The whole point of stoch vol models is to treat volatility as a random variable. How to parameterize its behavior is the million dollar question with a whole variety of possible answers. You pick whichever one suits your view.

All that, unless, of course, the SNB happens to have a view on it...

Isn't this the very same Dr. Ping Jiang who was allegedly involved in some interesting fun 'n games at SAC?

You can find detailed data, such as median age, dependency ratios, etc, for Japan (as well as other countries) here: http://esa.un.org/unpp/index.asp?panel=2

What exactly, pray tell, is "the bank of London"? Don't you think you should educate yourself just a wee bit more before voicing such strong opinions?

For the record, I disagree with their assessment...

Assuming a perfect BSM world (i.e. flat vol), all options are created equal in terms of their replication characteristics. So any individual option or a combination of options behaves the same way. Obviously, the further you get from a perfect BSM environment, the more things start behaving...

To me, it's simple... If you're a mkt-maker, i.e. your transaction costs are low and you have pricing power, you delta- and gamma-hedge short vol positions to your heart's content. In this case, your skill as a mkt-maker is in selling the risk premium at a price that's high enough to justify...

This isn't a problem with the Greeks, per se. It's a problem with trading in general, which is why scenario analysis is something I use a whole lot.

2) Futures are not derivatives of forwards, futures ARE forwards that are standardized and exchange-traded. Both are derivatives. 3) Let me put it to you this way. The <b>total</b> open interest in all CME CHFUSD futures contracts is 30,583, which is equivalent to a notional amt of arnd...

Regarding #2, futures are exchange-traded fwds, n'est-ce pas? Thus, wouldn't you agree that, if you trade the futures, you are, in fact, trading forward FX? Just for a guide, in CHFUSD 16Jun10 is arnd 8 fwd pts. That is, not so coincidentally, why CHFUSD spot is .9478, while the futures are...

I appreciate the effort, but, just out of curiosity, whatever made you think I don't understand?

Nooooo? You don't say? Really? I hope you didn't put too much of a strain on your analytical skills while you were figuring this one out... One is CHFUSD fwd, while the other is USDCHF spot, so it's sorta beyond obvious that "they go in opposite directions".

The futures are based on EURUSD and CHFUSD fwds. To say that they "track almost identical" is obviously equivalent to stating that EURCHF never moves, which would be a very silly thing to say, indeed. 1) So what do you think the futures contracts you're trading are? Hint: they ain't EURUSD...

As I mentioned, some of the earlier movements were definitely due to the SFP, as well as some bill maturations... However, most recently, the color I am getting from the mkt is that it's all about the GSE activities (specifically, the hoarding of reserves by the GSEs arnd the P&I payments...

The most recent spike is not about the SFP, but rather the GSEs gently withdrawing from lending in the FF mkt (for a variety of reasons).

So you're saying that there's "nearly" no such thing as EURCHF or, more specifically, that the relevant EURCHF fwd "nearly" doesn't ever move? I think the Swiss National Bank might just disagree with you there...

Look here for conversion factors: http://www.eurexchange.com/trading/products/INT/FIX/FGBM_en.html?mode=deliverable_bonds