Option pricing

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  • Bài giảng Chapter 8: Financial options and their valuation presents of Financial options, Black-Scholes Option Pricing Model. It helps you learn better.

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  • Options are financial instruments which are bought and sold in a market place. The people who do it well pocket large bonuses; companies that do it badly can suffer staggering losses. These are intensely practical activities and this is a technical book for practical people working in the industry.Options are financial instruments which are bought and sold in a market place. The people who do it well pocket large bonuses; companies that do it badly can suffer staggering losses.

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  • While the stochastic volatility (SV) generalization has been shown to improve the explanatory power over the Black-Scholes model, empirical implications of SV models on option pricing have not yet been adequately tested. The purpose of this paper is to first estimate a multivariate SV model using the efficient method of moments (EMM) technique from observations of underlying state variables and then investigate the respective effect of stochastic interest rates, systematic volatility and idiosyncratic volatility on option prices....

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  • CHAPTER 4 The Value of Uncertainty. The general assumption in financial option pricing is that enhanced volatility enhances the value of the option. For financial options, a series of “Greeks” are tools that can be used by analysts to describe and understand the sensitivity of the financial option to key uncertainty parameters.

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  • 6 TRADING VOLATILITY. LEARNING OBJECTIVES: The material in this chapter helps you to: • Recognize volatility abnormalities and use them in profitable trading strategies. • Understand and use the measures of option price change (“greeks”). • Read and interpret price distributions.

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  • Why does the CME now offer two Milk contracts? The Milk (Class III) was changed from the BFP in January 2000 to conform to the new component pricing structure of the dairy "reform" legislation for milk used in the manufacturing of hard cheeses. It has provided an excellent risk management tool for the cheese- milk industry.

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  • 1 INTRODUCTION. LEARNING OBJECTIVES: The material in this chapter will help you to: • Become familiar with the terms and concepts of option trading. • Analyze the components of option price. • Use historical and implied volatility to formulate your option trading strategy.

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  • Buying options is the best way to start trading options. The big advantage that you have is that you can’t lose more than you pay for the option. That is not true of some other option strategies such as option writing.The major error made by option buyers and the reason some take big losses is that they pay too much for their options. In fact, most option authorities recommend buying in-the-money options where the stock price is across the strike price.

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  • You cannot predict the future or control the present—these are prime directives governing the creation and use of options. This text takes the mystery out of predicting and profiting from the future price trends of stocks and futures contracts using fundamental and/or technical analysis along with option strategies that manage the associated risk. Savvy market operators have devised methods of attacking the markets aggressively, while protecting themselves from the daily risk of loss.

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  • In the framework of Black-Scholes-Merton option pricing models, by employing exotic options instead of plain options or warrants, this paper presents an equivalent decomposition method for the Callable Convertible Bonds (CCB). Furthermore, the analytic valuation formulae for CCB are obtained by using the analytic formulae for those simpler securities decomposed from CCB. This method is validated by comparing with Monte Carlo simulation. Besides, the effects of call clauses, coupon clauses, soft call condition clauses and dividend payment are analyzed respectively.

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  • An investor who has sold stock short in anticipation of a price decline can limit a possible loss by purchasing call options. Remember that shorting stock requires a margin account and margin calls may force you to liquidate your position prematurely. Although a call option may be used to offset a short stock position's upside risk, it does not protect the option holder against additional margin calls or premature liquidation of the short stock position. Assume you sold short 100 shares of XYZ stock at $40 per share.

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  • We build a three-factor term-structure of interest rates model and use it to price corporate bonds. The first two factors allow the risk-free term structure to shift and tilt. The third factor generates a stochastic credit-risk premium. To implement the model, we apply the Peterson and Stapleton (2002) diffusion approximation methodology. The method approximates a correlated and lagged-dependent lognormal diffusion processes. We then price options on credit-sensitive bonds.

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  • Chapter 7 "Foreign currency options" drug Lecture Multinational financial management introduce to you the content: Contract specifications, option positions, hedging using option contract, strategy on currencies option, option pricing.

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  • A put option contract gives its holder the right to sell a specified number of shares of the underlying stock at the given strike price on or before the expiration date of the contract. I. Buying puts to participate in downward price movements. Put options may provide a more attractive method than shorting stock for profiting on stock price declines, in that, with purchased puts, you have a known and predetermined risk. The most you can lose is the cost of the option. If you short stock, the potential loss, in the event of a price upturn, is unlimited.

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  • An MBA is a curious beast: it can accelerate your career, even if it has limited practical value in day-to-day management. Top employers hire top MBAs, but not because MBAs have mastered the mysteries of management. An MBA is a hallmark of personal commitment, effort, and ambition which employers value more than the actual content of the MBA course.

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  • Volatility forecasting is crucial for option pricing, risk management and portfolio management. Nowadays, volatility has become the subject of trading. There are now exchange-traded contracts written on volatility. Financial market volatility also has a wider impact on financial regulation, monetary policy and macroeconomy.

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  • The long-awaited sequel to the "Concepts and Practice of Mathematical Finance" has now arrived. Taking up where the first volume left off, a range of topics is covered in depth. Extensive sections include portfolio credit derivatives, quasi-Monte Carlo, the calibration and implementation of the LIBOR market model, the acceleration of binomial trees, the Fourier transform in option pricing and much more. Throughout Mark Joshi brings his unique blend of theory, lucidity, practicality and experience to bear on issues relevant to the working quantitative analyst....

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  • Basic principles underlying the transactions of financial markets are tied to probability and statistics. Accordingly it is natural that books devoted to mathematical finance are dominated by stochastic methods. Only in recent years, spurred by the enormous economical success of financial derivatives, a need for sophisticated computational technology has developed. For example, to price an American put, quantitative analysts have asked for the numerical solution of a free-boundary partial differential equation.

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  • Số lượng bài viết về options nói chung trên báo chí, sách vở và ngay ở đây không phải ít. Đây là một trong những công cụ tài chính quan trọng (để phòng ngừa rủi ro kinh doanh-đầu tư) và tài sản tài chính quan trọng (để trao đổi thương mại). Tuy nhiên, để hiểu rõ bản chất kỹ thuật của option cũng không hề đơn giản. Nhiệm vụ trọng tâm của nghiên cứu option là phương pháp và kỹ thuật định giá (option pricing).

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