Synthetic quanto spread - margin. What discounting?

F

fuqs

I have a question regarding quanto options in the interdealer market.

When a trader hedges his quanto risk in the interdealer market, he trades an ATM Synthetic Quanto Spread (the difference of 2 forwards)
Let's take a "quanto" structure: SPX quanto Euro.

[Call(S)_Dom - Put(S)_Dom] - [Call(S)_For - Put(S)_For]

S: is the foreign index (ex: SPX which is denominated in USD)
_Dom: as in domestic currency
_For: as in foreign currency

Now the question is, how are both legs discounted? OIS_Dom for the domestic option part and OIS_For for the foreign?
 
MrMuppet said:
In all honesty, walk over to nuclearphynace or wilmott forums.

Most of ET users don't even know what a quanto is.
More...

Obviously quanto is derogatory term for quants, as in “You lousy quanto stop stealing all my profits!”
 
You must log in or register to reply here.
Back
Top