Reply To: Modelling CME CQA Quarterly Coal Options

#8172
Israr Ahmed
Keymaster

(see attached pdf).

A bit of background on these type of Q/Y Futures which are actually margined/viewed as strips of M Futures. This is also the case with ICE NBP Gas Futures which typically has the Endur standard solution that the Q / Y are booked as Q / Y contracts but then everyday a ( customised for this purpose – but part of standard content ) cascade script cascades these into individual Monthly strips.

Similar solution should be applied to the Coal Q / Y Futures.

So the Q / Y options are booked on Q / Y Futures. As soon as its exercised into the Q / Y Future that then will get cascaded into the M Futures. So the key really is how the Q / Y Futures are set up.

Needless to say the standard set up on the Q / Y Curves so that they are averaging off the M curves with delta sensitivity showing back on the M curves completes the picture.

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