Stock option contract adjustments The case of special dividends
... any adjustment, based on its judgment as to what is appropriate for the protection of investors and the public interest, taking into account such factors as fairness to holder and writers (or purchasers and sellers) of affected contracts,y1 The purpose of this paper is to analyze the fairness of con ...
... any adjustment, based on its judgment as to what is appropriate for the protection of investors and the public interest, taking into account such factors as fairness to holder and writers (or purchasers and sellers) of affected contracts,y1 The purpose of this paper is to analyze the fairness of con ...
NBER WORKING PAPER SERIES DEMAND-BASED OPTION PRICING Nicolae Garleanu Lasse Heje Pedersen
... impossibility of trading continuously, stochastic volatility, jumps in the underlying, and transaction costs (Figlewski (1989)).1 To capture this effect, we depart from the standard no-arbitrage literature that follows Black-Scholes-Merton by considering explicitly how options are priced by competit ...
... impossibility of trading continuously, stochastic volatility, jumps in the underlying, and transaction costs (Figlewski (1989)).1 To capture this effect, we depart from the standard no-arbitrage literature that follows Black-Scholes-Merton by considering explicitly how options are priced by competit ...
Equity Quantitative Study - International Swaps and Derivatives
... to MarkitServ in OTC equity options and variance swaps. Table 1 provides an overview of the transactions that were analyzed in the study in terms of sample size. For simplicity, we restricted ourselves to the three major currencies where OTC equity derivatives are traded: JPY, EUR and USD. As the re ...
... to MarkitServ in OTC equity options and variance swaps. Table 1 provides an overview of the transactions that were analyzed in the study in terms of sample size. For simplicity, we restricted ourselves to the three major currencies where OTC equity derivatives are traded: JPY, EUR and USD. As the re ...
Chapter 10
... the analysis of derivatives. • Note that the Black–Scholes–Merton differential equation does not involve any variable that is affected by the risk preferences of investors. • The only variables are S0, T, s, and r. • So any set of risk preferences can be used when evaluating f. Let’s use risk neutra ...
... the analysis of derivatives. • Note that the Black–Scholes–Merton differential equation does not involve any variable that is affected by the risk preferences of investors. • The only variables are S0, T, s, and r. • So any set of risk preferences can be used when evaluating f. Let’s use risk neutra ...
The New Risk Management: The Good, the Bad
... percent of the shares and whose holdings are undiversified): expending resources to reduce risk may benefit the large shareholders at the expense of the rest of the shareholders. Management may have a similar conflict, since risk threatens their jobs and they may have a significant proportion of the ...
... percent of the shares and whose holdings are undiversified): expending resources to reduce risk may benefit the large shareholders at the expense of the rest of the shareholders. Management may have a similar conflict, since risk threatens their jobs and they may have a significant proportion of the ...
DETERMINING THE FAIR PRICE OF WEATHER HEDGING
... Weather derivatives are relatively new a la Arrow Debreu financial instruments that allow companies to limit their exposure to financial risks such as unusually high or low temperatures, the amount and duration of rainfall, the wind speed and power, etc. The dependence on the financial performance o ...
... Weather derivatives are relatively new a la Arrow Debreu financial instruments that allow companies to limit their exposure to financial risks such as unusually high or low temperatures, the amount and duration of rainfall, the wind speed and power, etc. The dependence on the financial performance o ...
Does Option Trading Impact Underlying Stock Prices
... theoretical models imply that this trading due to hedge rebalancing will either increase or decrease the volatility of the underlying asset, depending upon the nature (positive or negative gamma) of the option positions that are being hedged. This section develops the main testable prediction about ...
... theoretical models imply that this trading due to hedge rebalancing will either increase or decrease the volatility of the underlying asset, depending upon the nature (positive or negative gamma) of the option positions that are being hedged. This section develops the main testable prediction about ...
Demand-Based Option Pricing - Faculty Directory | Berkeley-Haas
... denote the agents who have a fundamental need for option exposure as “end users.” Intermediaries such as market makers provide liquidity to end users by taking the other side of the end-user net demand. If competitive intermediaries can hedge perfectly — as in a Black-Scholes-Merton economy — then o ...
... denote the agents who have a fundamental need for option exposure as “end users.” Intermediaries such as market makers provide liquidity to end users by taking the other side of the end-user net demand. If competitive intermediaries can hedge perfectly — as in a Black-Scholes-Merton economy — then o ...
Derivatives Digest
... Paisewallah: Is there a theoretical way of pricing futures? Sharekhan: The theoretical price of a futures contract is spot price of the underlying plus the cost of carry. Please note that futures are not about predicting future prices of the underlying assets. In general, Futures Price = Spot Price ...
... Paisewallah: Is there a theoretical way of pricing futures? Sharekhan: The theoretical price of a futures contract is spot price of the underlying plus the cost of carry. Please note that futures are not about predicting future prices of the underlying assets. In general, Futures Price = Spot Price ...
Forecasting Stock Market Volatility and the Informational Efficiency
... of an asset or portfolio, with risk being related to the volatility of the returns. The volatility of returns plays also a central role in the valuation of financial derivatives such as options and futures, and can, in fact, have a greater influence on the value of derivative securities than price mov ...
... of an asset or portfolio, with risk being related to the volatility of the returns. The volatility of returns plays also a central role in the valuation of financial derivatives such as options and futures, and can, in fact, have a greater influence on the value of derivative securities than price mov ...
Chapter 8 - FBE Moodle
... • The intrinsic value is the financial gain if the option is exercised immediately (at-the-money) – This value will reach zero when the option is out-of-themoney – When the spot rate rises above the strike price, the option will be in-the-money – At maturity date, the option will have a value equal ...
... • The intrinsic value is the financial gain if the option is exercised immediately (at-the-money) – This value will reach zero when the option is out-of-themoney – When the spot rate rises above the strike price, the option will be in-the-money – At maturity date, the option will have a value equal ...
Pricing Swing Options and other Electricity Derivatives
... In this thesis we propose and examine in detail a simple mean-reverting process exhibiting price spikes. A distinct feature of electricity markets is the formation of price spikes and are caused by events where the maximum supply is approached by current demand. The occurrence of spikes has far reac ...
... In this thesis we propose and examine in detail a simple mean-reverting process exhibiting price spikes. A distinct feature of electricity markets is the formation of price spikes and are caused by events where the maximum supply is approached by current demand. The occurrence of spikes has far reac ...
