Financial calculus Introduction to Financial Option Valuation 9 potx
Financial calculus Introduction to Financial Option Valuation_2 pdf
... data 47 199 8 199 9 2000 2001 40 50 60 70 80 90 100 110 120 130 140 Price IBM weekly Fig. 5.2. Weekly IBM share price from January 199 8 to December 2001. −5 0 5 0 0.1 0.2 0.3 0.4 IBM Daily Histogram −5 0 ... characterized by (6.8) and (6 .9) is the solution to an SDE. Reasonably accessible SDE texts are (Gard, 198 8; Mao, 199 7; Øksendal, 199 8), although all require some background i...
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Financial calculus Introduction to Financial Option Valuation_3 doc
... of the Black–Scholes formula include (Bj ¨ ork, 199 8; Duffie, 2001; Karatzas and Shreve, 199 8; Nielsen, 199 9; Øksendal, 199 8). It is possible to weaken the boundary conditions (8.17) and (8.18) ... RITCHIE, option trader, source (Bass, 199 9) 74 Black–Scholes PDE and formulas The key idea in this chapter is hedging to eliminate risk.Toreinforce the idea, and emphasize that it is a co...
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Financial calculus Introduction to Financial Option Valuation_4 pptx
... getting into the nitty-gritty of differentiation. Exceptions are (Kwok, 199 8; Nielsen, 199 9). For more infor- mation on interpreting the Greek formulas, see (Hull, 2000; Kwok, 199 8; Nielsen, 199 9), ... Value’) grid on Fig. 9. 5. Program of Chapter 9: ch 09. m. 94 More on hedging their Nobel Prizes. However, in mid- 199 8 a combination of extreme events in the market plunged LTCM into...
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Financial calculus Introduction to Financial Option Valuation_5 doc
... (Duffie, 2001; Karatzas and Shreve, 199 8; Nielsen, 199 9) cover this material in depth, while perhaps the most accessible introduction is (Baxter and Rennie, 199 6). Chapter 6 of (Kritzman, 2000) ... DEWYNNE (Wilmott et al., 199 5) Risk neutral valuation, which was developed by John Cox and Stephen Ross, has the dual virtues that it can be applied to practically any option valuation...
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Financial calculus Introduction to Financial Option Valuation_6 ppt
... derivatives. PAUL WILMOTT (Wilmott, 199 8) A smiley implied volatility is the wrong number to put in the wrong formula to obtain the right price. RICCARDO REBONATO (Rebonato, 199 9) It is the strong opinion ... from (6.15), P a − 1 .96 b √ M ≤ a M ≤ a + 1 .96 b √ M = 0 .95 . We may re-write this as P a M − 1 .96 b √ M ≤ a ≤ a M + 1 .96 b √ M = 0 .95 . (15.4) The ratio b/ √ M appea...
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Financial calculus Introduction to Financial Option Valuation_8 potx
... applied to any of the generalized path-dependent options men- tioned in Sections 19. 2, 19. 3, 19. 4. 196 Exotic options The binomial method does not naturally extend to path-dependent options, ... p)V i+1 n , ( 19. 9) for 0 ≤ n ≤ i and 0 ≤ i ≤ M −1. The overall method is then defined by (16.1), (16.2) and ( 19. 9). 19. 7 Notes and references The texts (Kwok, 199 8) and (Wilmott et al...
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Financial calculus Introduction to Financial Option Valuation_9 potx
... $143 million in 199 7) PHILIP MCBRIDE JOHNSON (Johnson, 199 9) 19. 8 Program of Chapter 19 and walkthrough 199 19. 7. Write down a pseudo-code algorithm for Monte Carlo applied to a float- ing strike ... $1.7 billion loss in 199 4) Baring’s Bank (bankrupted after $1.3 billion loss in 199 5) Sumitomo (lost $1.3 billion in 199 6) Government of Belgium ($1.2 billion loss in 199 7) Nation...
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Financial calculus Introduction to Financial Option Valuation_10 ppt
... widths 10 2 [1.8841, 2.0752] [1 .96 23, 2.0004] 0. 89 5.0 10 3 [1 .95 38, 2.0087] [1 .99 37, 2.0048] 0.88 4 .9 10 4 [1 .98 90, 2.0062] [1 .99 93, 2.0027] 0.88 5.0 10 5 [1 .99 69, 2.0023] [1 .99 94, 2.0005] 0.88 5.0 var(e √ U − ... widths 10 2 [1.8841, 2.0752] [1 .96 01, 2.0031] 4.4 10 3 [1 .95 38, 2.0087] [1 .99 51, 2.0084] 4.1 10 4 [1 .98 90, 2.0062] [1 .99 94, 2.0036] 4.1 10 5 [1 .99 69,...
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An Introduction to Financial Option Valuation: Mathematics, Stochastics and Computation_13 pot
... see (Iserles, 199 6; Mitchell and Griffiths, 198 0; Morton and Mayers, 199 4; Strikwerda, 198 9). The texts (Clewlow and Strickland, 199 8; Kwok, 199 8; Wilmott, 199 8; Wilmott et al., 199 5; Seydel, 2002) ... and (23. 19) , and also do justice to the Lax Equivalence Theorem, include (Iserles, 199 6; Mitchell and Griffiths, 198 0; Morton and Mayers, 199 4; Strikwerda, 198 9). A freely avai...
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An Introduction to Financial Option Valuation: Mathematics, Stochastics and Computation_14 pot
... options. Working paper, University of Columbia, New York. Bass, Thomas A. ( 199 9) The Predictors. London: Penguin. Baxter, Martin and Andrew Rennie ( 199 6) Financial Calculus: An Introduction to Derivative ... 56, 57, 59, 60, 66, 70, 118 London International Financial Futures and Options Exchange, 5, 135 London Stock Exchange, 50 Long-Term Capital Management, 93 94 lookback opti...
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