Optimal Hedging when the Underlying Asset Follows a
... 1997). It identies the cheapest trading strategy whose terminal wealth is at least equal to
the derivative's payo. Since the option buyer alone carries the price of the hedging risk,
the initial capital required is often unacceptably large. Eberlein & Jacod (1997) show that,
under many models, the ...
contract design, arbitrage, and hedging in the eurodollar futures
... to use the discount or add-on pricing function.
Physical delivery of a Eurodollar time deposit is impractical. These instruments do not
trade in a secondary market. Hence, the only parties who could hold short positions, and
therefore deliver the underlying would be London banks. This feature, if ad ...
chapter 16
... Amortization of bond discount.
Unamortized bond discount related to converted bonds.
Conversion of convertible bonds.
Conversion of convertible preferred stock.
Bonds issued with detachable stock warrants.
Bonds issued with detachable stock warrants.
Bonds issued with detachable stock warrants.
Bond ...
File
... When stock dividends or stock splits occur, companies must restate the shares outstanding after the stock dividend or split, in order to compute the weighted-average number of
shares.
...
Lévy Processes in Finance: Theory, Numerics, and Empirical Facts
... a stock price model. He justified this approach by a psychological argument based on the Weber-Fechner
law, which states that humans perceive the intensity of stimuli on a log scale rather than a linear scale.
In a more systematic manner, the same process exp(Bt ), which is called exponential—or geo ...
exam133
... [XXXXX Footnote 22 in the Appendix B Example 3 Paragraph 123 of FAS 133. If the hedged item were a
foreign-currency-denominated available-for-sale security instead of a firm commitment, Statement 52 would have required its
carrying value to be measured using the spot exchange rate. Therefore, the sp ...
Forward and Futures Contracts
... past, the firm has issued straight debt with a yield-to-maturity of 8.2%.
If the new bonds are convertible into 20 shares of stocks, per $1,000
face value, what interest rate will the firm have to pay on the bonds?
You have the opportunity to buy a mine with 1 million kgs of copper for
$400,000. C ...
Futures Contracts
... Margin is required - initial margin as well as maintenance
margin.
...
Download Dissertation
... (1997). These two papers show how security market data restrict the admissible region
for means and standard deviations of intertemporal marginal rates of substitution (IMRS)
which can be used to assess model specification. Specifically, Hansen and Jagannathan
(1991) calculate the lower bound on the ...
What is Arbitrage? - Palladium Capital Advisors
... Option Arbitrage commonly refers to an equity trading strategy
utilizing options, such as calls, puts, and warrants. The value of an
option and the way it is priced in the market is based on sophisticated
pricing models involving a number of variables including volatility,
share price, exercise pric ...
Moneyness
In finance, moneyness is the relative position of the current price (or future price) of an underlying asset (e.g., a stock) with respect to the strike price of a derivative, most commonly a call option or a put option. Moneyness is firstly a three-fold classification: if the derivative would make money if it were to expire today, it is said to be in the money, while if it would not make money it is said to be out of the money, and if the current price and strike price are equal, it is said to be at the money. There are two slightly different definitions, according to whether one uses the current price (spot) or future price (forward), specified as ""at the money spot"" or ""at the money forward"", etc.This rough classification can be quantified by various definitions to express the moneyness as a number, measuring how far the asset is in the money or out of the money with respect to the strike – or conversely how far a strike is in or out of the money with respect to the spot (or forward) price of the asset. This quantified notion of moneyness is most importantly used in defining the relative volatility surface: the implied volatility in terms of moneyness, rather than absolute price. The most basic of these measures is simple moneyness, which is the ratio of spot (or forward) to strike, or the reciprocal, depending on convention. A particularly important measure of moneyness is the likelihood that the derivative will expire in the money, in the risk-neutral measure. It can be measured in percentage probability of expiring in the money, which is the forward value of a binary call option with the given strike,and is equal to the auxiliary N(d2) term in the Black–Scholes formula. This can also be measured in standard deviations, measuring how far above or below the strike price the current price is, in terms of volatility; this quantity is given by d2. Another closely related measure of moneyness is the Delta of a call or put option, which is often used by traders but actually equals N(d1), not N(d2), and there are others, with convention depending on market.