|Black-Scholes option-pricing model|
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Definition of Black-Scholes option-pricing model
Black-Scholes option-pricing model
A model for pricing call options based on arbitrage arguments that uses
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
Yield curve option-pricing models.
An alternative model to the capital asset pricing model developed by
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
A method of pricing options or other equity derivatives in
An option pricing model in which the underlying asset can take on only two
An illegal market.
The first complete mathematical model for pricing
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.
constant-growth dividend discount model
Version of the dividend discount model in which dividends grow at a constant rate.
Also called the Gordon-Shapiro model, an application of the dividend discount
A method of pricing in which a mark-up is added to the total product/service cost.
Covered or hedge option strategies
Strategies that involve a position in an option as well as a position in the
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
Discounted dividend model (DDM)
A formula to estimate the intrinsic value of a firm by figuring the
dividend discount model
Computation of today’s stock price which states that share value equals the present value of all expected future dividends.
Dividend discount model (DDM)
A model for valuing the common stock of a company, based on the
Dividend growth model
A model wherein dividends are assumed to be at a constant rate in perpetuity.
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
economic components model
Abrams’ model for calculating DLOM based on the interaction of discounts from four economic components.
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
A way of decomposing the factors that influence a security's rate of return into common and
Foreign currency option
An option that conveys the right to buy or sell a specified amount of foreign
An option on a futures contract. Related: options on physicals.
Garmen-Kohlhagen option pricing model
A widely used model for pricing foreign currency options.
present value of a perpetuity with growth.
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
in the black
Making a profit.
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
A model of stock returns using a market index such as the S&P 500 to represent common or
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.
Internet business model
a model that involves
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.
log size model
Abrams’ model to calculate discount rates as a function of the logarithm of the value of the firm.
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
This relationship is sometimes called the single-index model. The market model says that the
A model for selecting an optimum investment portfolio,
The process of creating a depiction of reality, such as a graph, picture, or mathematical
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
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
Pie model of capital structure
A model of the debt/equity ratio of the firms, graphically depicted in slices of
The option of postponing a project without eliminating the possibility of undertaking it.
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