|Arbitrage-free option-pricing models|
Information about financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit.
Main Page: financial, inventory control, business, finance, payroll, tax advisor, inventory, credit,
Definition of Arbitrage-free option-pricing models
Arbitrage-free option-pricing models
Yield curve option-pricing models.
The option of terminating an investment earlier than originally planned.
IRS rules used to allocate income on export sales to a foreign sales corporation.
An option that may be exercised at any time up to and including the expiration date.
An option that can be exercised any time until its
An option contract that can be exercised at any time between the date of purchase and
The simultaneous buying and selling of a security at two different prices in two different markets,
The purchase of securities on one market for immediate resale on
Transactions designed to make a sure profit from inconsistent prices.
An alternative model to the capital asset pricing model developed by
People who search for and exploit arbitrage opportunities.
option based on the average price of the asset during the life of the option.
A model for determining the required rate of return on an asset.
A model, such as the Capital Asset pricing Model (CAPM), that determines the required
Gives the lessee the option to purchase the asset at a price below fair market
Contracts with trigger points that, when crossed, automatically generate buying or selling of
Packages that involve the exchange of more than two currencies against a base currency at
Binomial option pricing model
An option pricing model in which the underlying asset can take on only two
Black-Scholes option-pricing model
A model for pricing call options based on arbitrage arguments that uses
cafeteria plan a “menu” of fringe benefit options that include
cash or nontaxable benefits
Call an option
To exercise a call option.
An option contract that gives its holder the right (but not the obligation) to purchase a specified
A contract that gives the holder the right to buy an asset for a
Right to buy an asset at a specified exercise price on or before the exercise date.
Capital asset pricing model (CAPM)
An economic theory that describes the relationship between risk and
Capital Asset Pricing Model (CAPM)
A model for estimating equilibrium rates of return and values of
capital asset pricing model (CAPM)
Theory of the relationship between risk and return which states that the expected risk
option on an option.
A method of pricing in which a mark-up is added to the total product/service cost.
Covered interest arbitrage
A portfolio manager invests dollars in an instrument denominated in a foreign
Covered or hedge option strategies
Strategies that involve a position in an option as well as a position in the
Taking advantage of divergences in exchange rates in different money markets by
An option to buy or sell a foreign currency.
Over-the-counter options, such as those offered by government and mortgage-backed
The options available to the seller of an interest rate futures contract, including the quality
Liability-matching models that assume that the liability payments and the asset cash
A sinking fund provision that may allow repurchase of twice the required number of bonds
Barrier option that comes into existence if asset price hits a barrier.
Barrier option that expires if asset price hits a barrier.
dual pricing arrangement
a transfer pricing system that allows
Elasticity of an option
Percentage change in the value of an option given a 1% change in the value of the
An option that is part of the structure of a bond that provides either the bondholder or
Securities that give the holder the right to buy or sell a specified number of shares of stock, at
Escalating Price Option
A nonqualified stock option that uses a sliding scale for
option that may be exercised only at the expiration date. Related: american option.
An option that can be exercised only on its expiration date.
An option contract that can only be exercised on the expiration date.
Exercising the option
The act buying or selling the underlying asset via the option contract.
A variety of options available to an investor to recover their invested capital and the return on their investment.
Extrapolative statistical models
models that apply a formula to historical data and project results for a
Foreign currency option
An option that conveys the right to buy or sell a specified amount of foreign
free cash flow
Generally speaking, this term refers to cash flow from
Free Cash Flow
The funds available for distribution to the capital providers of the
Free cash flows
Cash not required for operations or for reinvestment. Often defined as earnings before
An exchange rate system characterized by the absence of government intervention. Also known as
Free on board
Implies that distributive services like transport and handling performed on goods up to the
Free-on-Board (FOB) Destination
A shipping arrangement agreed to between buyer and
Free-on-Board (FOB) Shipping Point
A shipping arrangement agreed to between buyer and
Excess reserves minus member bank borrowings at the Fed.
A follower who avoids the cost and expense of finding the best course of action and by simply
The absence of any government restrictions, such as tariffs or quotas, on imports or exports.
An option on a futures contract. Related: options on physicals.
Garmen-Kohlhagen option pricing model
A widely used model for pricing foreign currency options.
option that allows the underwriter for a new issue to buy and resell additional shares.
Heavenly Parachute Stock Option
A nonqualified stock option that allows a deceased option holder’s estate up to three years in which to exercise his or her
Incentive Stock Option
An option to purchase company stock that is not taxable
Index and Option Market (IOM)
A division of the CME established in 1982 for trading stock index
An investment/trading strategy that exploits divergences between actual and theoretical
A call or put option based on a stock market index.
One of several investment accounts in which your premiums may be invested within your life insurance policy.
Intrinsic value of an option
The amount by which an option is in-the-money. An option which is not in-themoney
Irrational call option
The implied call imbedded in the MBS. Identified as irrational because the call is
Liquid yield option note (LYON)
Zero-coupon, callable, putable, convertible bond invented by Merrill
Liquid yield option note (LYON)
Zero-coupon, callable, putable, convertible bond invented by Merrill Lynch & Co.
An option that allows the buyer to choose as the option strike price any price of the
Margin requirement (Options)
The amount of cash an uncovered (naked) option writer is required to
Multi-option financing facility
A syndicated confirmed credit line with attached options.
Naked option strategies
An unhedged strategy making exclusive use of one of the following: Long call
Nonqualified Stock Option
A stock option not given any favorable tax treatment
North American Free Trade Agreement (NAFTA)
an agreement among Canada, Mexico, and the United States establishing the North American free Trade Zone, with a resulting reduction in trade barriers
Gives the buyer the right, but not the obligation, to buy or sell an asset at a set price on or before a
See call option and put option
A right to buy or sell specific securities or commodities at a stated
Right to buy or sell a specified property at a specified amount at some time in the future.
Option-adjusted spread (OAS)
1) The spread over an issuer's spot rate curve, developed as a measure of
The percentage increase in an option's value given a 1% change in the value of the
Option not to deliver
In the mortgage pipeline, an additional hedge placed in tandem with the forward or
The option price.
Also called the option premium, the price paid by the buyer of the options contract for the right
Also called the option writer , the party who grants a right to trade a security at a given price in
A contract that, in exchange for the option price, gives the option buyer the right, but not
Options contract multiple
A constant, set at $100, which when multiplied by the cash index value gives the
Options on physicals
Interest rate options written on fixed-income securities, as opposed to those written on
A call option is out-of-the-money if the strike price is greater than the market price
Path dependent option
An option whose value depends on the sequence of prices of the underlying asset
percentage of sales models
Planning model in which sales forecasts are the driving variables and most other variables are
The option of postponing a project without eliminating the possibility of undertaking it.
Also called external efficiency, a market characteristic where prices at all times fully
Put an option
To exercise a put option.
Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit.