Introduction in to Option Management (pdf)
SFM SFS Chap 2 Introduction in to Option Management
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SFM SFS Chap 2 Introduction in to Option Management
Introduction in to Option Management
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Courselet Content
1 components
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4.94 M |
Requirements
- MVA knowledge
General Overview
Description
This chapter introduces option management through no-arbitrage pricing and portfolio replication.
A perfect financial market assumes no transaction costs or taxes and permits short selling.
Forward prices reflect financing costs and any dividends or other carrying costs.
An option’s premium consists of intrinsic value and time value.
Put–call parity links European calls and puts with the underlying stock and a risk-free investment.
In Exercise 2.1, a stock initially worth USD 110 can rise to USD 132 or fall to USD 88.
With a one-period interest rate of 10%, the risk-neutral probability of an increase is 0.75.
For a strike price of USD 100, the call costs approximately USD 21.82 and the put USD 2.73.
Stock and bond portfolios replicate both options and confirm put–call parity.
Exercise 2.2 illustrates arbitrage using an underpriced call, a short stock position, and risk-free savings.
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Meet the instructors !
About the Instructor
Wolfgang Karl HÄRDLE attained his Dr. rer. nat. in Mathematics at Universität Heidelberg in 1982 and in 1988 his habilitation at Universität Bonn. He is Ladislaus von Bortkiewicz Professor of Statistics at Humboldt-Universität zu Berlin and the director of the Sino German Graduate School (洪堡大学 + 厦门大学) IRTG1792 on “High dimensional non stationary time series analysis”. He directs IDA Institute for Digital Assets,
University of Economic Studies, Bucharest, RO. His research focuses on data analytics, dimension reduction and quantitative finance. He has published over 30 books and more than 300 papers in top statistical, econometrics and finance journals. He is highly ranked and cited on Google Scholar, REPEC and SSRN. He has professional experience in financial engineering, S.M.A.R.T. (Specific, Measurable, Achievable, Relevant, Timely) data analytics, machine learning and cryptocurrency markets. He has created the www.quantlet.com platform, a cryptocurrency index, CRIX www.royalton-crix.com He is 玉山学者 （Yushan Scholar), web page hu.berlin/wkh