Finance 1. An investor believes that there will be a big jump in a stock price, but is uncertain as to the direction. Identify the different strategies (about 4) the investor can follow and briefly explain the differences among them. (Hint: There are potentially six different strategies) 2.
Three call options on a stock have Continue reading" Finance" 3 P a g e 1. 2 Background of this thesis The Global Financial Crisis began to erupt in 2007 when the subprime mortgage crisis unfolded in the US and spread rapidly to most financial markets around the globe. Closed form spread option valuation Petter Bjerksund and Gunnar Stensland Department of Finance, NHH Helleveien 30, N5045 Bergen, Norway email: Phone: 47 55, Fax: 47 55 This version: October 31, 2006 Abstract This paper considers the valuation of a spread call when asset prices arelognormal.
traded across di erent sectors of the Finance option spread thesis markets; for example, the crack spread and crush spread options in the commodity markets [16, 22, credit spread options in the xed income markets, index spread options in the equity markets [10 and the spark (electricityfuel) spread options in the energy markets [9, 18.
Pricing Spread Options using Matched Asymptotic Expansions start by applying an asymptotic expansion on the correlation in the two dimensional Black& A spread option is a derivative based on the value of the difference, or spread, between the prices of two or more assets.
Carr, Peter, Katrina Ellis, and Vishal Gupta (1998), " Static Hedging of Exotic Options"Journal of Finance, 53(3), shows the static hedging articles also appear in top journals. The Carrarticles work with the BlackScholes model, and end up with quite explicit formulas for" which& how many puts and calls to buy". PRICING AND HEDGING SPREAD OPTIONS RENE CARMONA AND VALDO DURRLEMAN ABSTRACT.
We survey the theoretical and the computational problems associated with the pricing of spread options. These options are ubiquitous in the nancial markets, whether they be equity, xed income, foreign exchange, Optionadjusted spread. To discount a securitys price and match it to the current market price, the yield spread must be added to a benchmark yield curve.
This adjusted price is called optionadjusted spread. This is usually used for mortgagebacked securities (MBS), bonds, interest rate derivatives, and options.
2 (An option is in the money, when it is more profitable for its holder to exercise the option than to make transactions directly in the underlying asset. Otherwise the option is out of the money.