金融工程数值方法分析.pptVIP

CHAPTER 2derivatives In this Chapter the definitions of basic derivative instruments option jargon how to draw payoff diagrams no arbitrage and put-call parity simple option strategies Options have been around for many years, but it was only on 26th April 1973 that they were first traded on an exchange. It was then that The Chicago Board Options Exchange (CBOE) first created standardized, listed options. The simplest option gives the holder the right to trade in the future at a previously agreed price but takes away the obligation. A call option is the right to buy a particular asset for an agreed amount at a specified time in the future. A put option is the right to sell a particular asset for an agreed amount at a specified time in the future. If we use S to mean the stock price and E the strike then at expiry the option is worth: call: put: Calls and puts are the two simplest forms of option. For this reason they are often referred to as vanilla because of the ubiquity of that flavor. There are many, many more kinds of options. DEFINITION OF COMMON TERMS: The subjects of mathematical finance and derivatives theory are filled with jargon. The jargon comes from both the mathematical world and the financial world. Premium: The amount paid for the contract initially. Underlying (asset): The financial instrument on which the option value depends. Stocks, commodities, currencies and indices are going to be denoted by S. Strike (price) or exercise price: The amount for which the underlying can be bought (call) or sold (put). This will be denoted by E. Expiration (date) or expiry (date): Date on which the option can be exercised or date on which the option ceases to exist or give the holder any rights. This will be denoted by T . Intrinsic value: The payoff that would be received if the underlying is at its current level when the option expires. Time value: Any value that the option has above its intrinsic value. In the money: An option with positive in