Options Valuation
About the Lecture
The lecture Options Valuation by Edu Pristine is from the course Archiv - Financial Markets and Products. It contains the following chapters:
- Complications in Valuing Options
- Binomial Method of Valuing Options
- Replicating Call Option
- Replicating Put Option
Author of lecture Options Valuation
Edu Pristine
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Excerpts from the accompanying material
... Method of Valuing Options. An Example: -Replicating Call Option -Replicating Put Option -Risk Neutral Valuation Change in ...
... Complications that arise in valuing Options -Impossible to quantify risks associated with the Option cash flows risks associated ...
... in any given interval of time -Determining Option pay-offs at these prices -Replicating the same pay-offs in a package consisting of assets that can be valued -Alternatively, determining probability of each pay-off to ...
... was a bit less than 4 percent per year, or about 2 percent for six months. The stock either falls to ...
... (Confidential) Solution The pay-offs are as follows: ...
... Calculated as shown below ... value of put = -0.4286 shares + PV( Rs. 48.57) ...
... as shown below: The value of put therefore is: Value of put = -0.4286 shares + PV( Rs. 48.57) (safe ...
... of valuing options an example replicating call option peplicating put option risk neutral valuation change in ...
... Complications that arise in valuing options. Impossible to quantify risks associated with the option cash flows. Risks ...
... any given interval of time. Determining option pay-offs at these prices. Replicating the same pay-offs in a package consisting of assets that can be valued. Alternatively, determining probability of each pay-off ...
... was a bit less than 4 percent per year, or about 2 percent for six months. The stock either falls to Rs ...
... The pay-offs are as follows: 8 Stock Price = Rs. ...
... as in the previous example for the call option. It follows that the value of the call today should be equal to the value of 0.5714 shares less present value of Rs. 36.43. Thus, value of Call = Rs. 12.86 ...
... be borrowed? The number of shares to be held is give by the option delta, given by: The amount to be borrowed is equal to the present value of the difference between the pay-offs from the option and pay offs from ...
... Calculated as shown below: 13 4286 .0 75 . 63 33 . 113 25 . 21 0 = prices share possible of spread price option of possible spread scenario 1 scenario ...
