Pricing and Hedging Asian Options By Vineet B. Lakhlani Pricing and Hedging Asian Options Table of Contents Table of Contents 1. Introduction to Derivatives 2. Exotic Options 2.1. Introduction to Asian Options 3.1. Binomial Option Pricing Model 3.2. Black-Scholes Model 3.2.1. Black-Scholes PDE Derivation 3.2.2. Black-Scholes Formula 1 2 3 4 4 5 6 7 3 3. Option Pricing Methodologies 4. Asian Option Pricing
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academics have made the argument that traditional discounted cash flow models do a poor job of capturing the value of the options embedded in many corporate actions. They have noted that these options need to be not only considered explicitly and valued, but also that the value of these options can be substantial. In fact, many investments and acquisitions that would not be justifiable otherwise will be value enhancing, if the options embedded in them are considered. In this paper, we examine the merits
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Second Order Moment Approach to Real Options Analysis Submitted as a Component of Required Courses for the Award of Bachelor of Engineering (Civil) Honours School of Civil Engineering University of New South Wales Author: Ariel Hersh October 2010 Supervisor: Professor David G. Carmichael i ORIGINALITY STATEMENT ‘I hereby declare that this submission is my own work and to the best of my knowledge it contains no materials previously published or written by another
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BEA3001 Financial Management 2012-2013 Option Pricing Dr Bill Peng, CFA Today • Describe the basic characteristics of financial options • Develop the Binomial Option Pricing Model • Discuss the Put-Call Parity theorem • Introduce and apply Black-Scholes Option Pricing Model BP BEA3001 Financial Management 2 Coursework Test 1 Directions • Reminder: CW Test 2 [4pm Wed 20th Mar 2013] • CW Test 1: 6pm on Monday 26th November • Students entitled to extra time: STC/C • Surnames starting
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Chapter 12 & 20 Chapter 21 The Black-Scholes Formula and Option Greeks Adapted from Black & Scholes (1973), The Pricing of Options and Corporate Liabilities, The Journal of Political Economy, Vol. 81, No. 3., pp. 637-654. 2 Black-Scholes Assumptions • Assumptions about stock return distribution Continuously compounded returns on the stock are normally distributed and there is no jumps in the stock price The volatility is a known constant Future dividends are known, either
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examines the problem of pricing a European call on an asset (Stock) that has a stochastic or variable volatility. Addressing this problem was done by investigating two cases: the first case is to determine the option price when the stochastic volatility is independent of stock price. The second case is to determine the option price when the stochastic volatility is correlated with the stock price. This paper provides a solution in series form for the stochastic volatility option, in addition to a discussion
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LECTURE 7: BLACK–SCHOLES THEORY 1. Introduction: The Black–Scholes Model In 1973 Fisher Black and Myron Scholes ushered in the modern era of derivative securities with a seminal paper1 on the pricing and hedging of (European) call and put options. In this paper the famous Black-Scholes formula made its debut, and the Itˆ calculus was unleashed upon the world o 2 of finance. In this lecture we shall explain the Black-Scholes argument in its original setting, the pricing and hedging of European
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Accounting for Stock Options http://www.nysscpa.org/printversions/cpaj/2005/805/p30.htm Print Accounting for Stock Options Update on the Continuing Conflict By Nicholas G. Apostolou and D. Larry Crumbley AUGUST 2005 - In December 2004, a decade after bending to Congressional pressure and backing away from requiring the expensing of options on financial statements, FASB issued a revised standard to recognize stock-option compensation as an expense on income statements. Many in Congress may
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terms, once financing charges are met. OPTION PRICING: The buyer of a call option gets the right to buy the underlying the underlying asset at affixed price, where as the buyer of a put option obtains the right to sell the underlying asset at a fixed price. Alternatives to the binomial model In the binomial option pricing model, the underlying asset and risk free lending or borrowing are combined to create a portfolio that had the same cash flows as the option being valued; we called this portfolio
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Question 1 The rationale of an Apache acquisition of MW Petroleum is plausible, yet there are outstanding concerns. By completing a deal, Apache stands to benefit from several aspects. First, MW isa large company which has more than double Apache’s reserves and it includesproperties that are well-suited to Apache’s operating capabilities. Moreover, on behalf of MW, Amoco operated fields accounting for approximately 80% of MW’s production. Such high operating percentage would promise Apache significant
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