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OPTIONS、FUTURES OTHERDERIVATIVES STUDENT PRESENTATION TUTOR：PROF YE 指导老师：叶永刚教授 STUDENT NAME：HEHAO 学生姓名：贺昊 NO.：200321050773 Extension of theTheoretical Framework for Pricing Derivatives;Martingales and Measures Chapter 19 Derivatives Dependent on a Single Underlying Variable Forming a Riskless Portfolio Market Price of Risk (Page 500) This shows that (m – r )/s is the same for all derivatives dependent on the same underlying variable, q We refer to (m – r )/s as the market price of risk for q and denote it by l Differential Equation for ?(Equation 19.10, page 501) Using Ito’s lemma to obtain expressions for m and s in terms of m and s. The equation m-ls=r becomes Risk-Neutral Valuation The differential equation shows that q is like a stock price paying a dividend yield of r – m + ls This analogy shows that we can value ? in a risk-neutral world providing the drift rate of q is reduced from m to m – ls Extension of the Analysisto Several Underlying Variables(Equations 19.12 and 19.13, page 503) Derivatives Dependent on Commodity Prices (Page 506) For a commodity the futures price gives the expected value in the traditional risk-neutral world Martingales (Page 507) A martingale is a stochastic process with zero drfit A martingale has the property that its expected future value equals its value today Alternative Worlds A Key Result (Page 509) Forward Risk Neutrality We refer to a world where the market price of risk is the volatility of g as a world that is forward risk neutral with respect to g. If Eg denotes a world that is FRN wrt g Aleternative Choices for the Numeraire Security g Money Market Account Zero-coupon bond price Annuity factor Money Market Accountas the Numeraire The money market account is an account that starts at $1 and is always invested at the short-term risk-free interest rate The process for the value of the account is dg=rgdt This has zero volatility. Using the money market account as the numeraire leads to t