Option Valuation参考.ppt

CHAPTER 22 Futures Markets Arbitrage Possibilities If spot-futures parity is not observed, then arbitrage is possible. If the futures price is too high, short the futures and acquire the stock by borrowing the money at the risk free rate. If the futures price is too low, go long futures, short the stock and invest the proceeds at the risk free rate. Spread Pricing: Parity for Spreads Spreads If the risk-free rate is greater than the dividend yield (rf d), then the futures price will be higher on longer maturity contracts. If rf d, longer maturity futures prices will be lower. For futures contracts on commodities that pay no dividend, d=0, F must increase as time to maturity increases. Figure 22.6 Gold Futures Prices Futures Prices vs. Expected Spot Prices Expectations Normal Backwardation Contango Modern Portfolio Theory Figure 22.7 Futures Price Over Time, Special Case Figure 21.10 Profit on a Protective Put Strategy Figure 21.11 Hedge Ratios Change as the Stock Price Fluctuates Hedging On Mispriced Options Option value is positively related to volatility. If an investor believes that the volatility that is implied in an option’s price is too low, a profitable trade is possible. Profit must be hedged against a decline in the value of the stock. Performance depends on option price relative to the implied volatility. Hedging and Delta The appropriate hedge will depend on the delta. Delta is the change in the value of the option relative to the change in the value of the stock, or the slope of the option pricing curve. Delta = Change in the value of the option Change of the value of the stock Example 21.6 Speculating on Mispriced Options Implied volatility = 33% Investor’s estimate of true volatility = 35% Option maturity = 60 days Put price P = $4.495 Exercise price and stock price = $90 Risk-free rate = 4% Delta = -.453 Table 21.3 Profit on a Hedged Put Portfoli