The Impact On Option Pricing Of Specification Error In The Underlying Stock Price Returns Classic Reprint

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The Impact on Option Pricing of Specification Error in the Underlying Stock Price Returns (Classic Reprint)

Author : Robert C. Merton
Publisher : Forgotten Books
ISBN 13 : 9780331884531
Total Pages : 82 pages
Book Rating : 4.8/5 (845 download)

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Book Synopsis The Impact on Option Pricing of Specification Error in the Underlying Stock Price Returns (Classic Reprint) by : Robert C. Merton

Download or read book The Impact on Option Pricing of Specification Error in the Underlying Stock Price Returns (Classic Reprint) written by Robert C. Merton and published by Forgotten Books. This book was released on 2017-11-24 with total page 82 pages. Available in PDF, EPUB and Kindle. Book excerpt: Excerpt from The Impact on Option Pricing of Specification Error in the Underlying Stock Price Returns At the heart of the derivation of the Black - Scholes option pricing formula is the arbitrage technique by which investors can follow a dynamic pertfolio strategy using the stock and riskless borrowing t0'exactly repro duce the return structure of an option. By following this strategy in com bination with a short position in an option, the investor can eliminate all risk from the total position, and hence to avoid arbitrage.opportunities. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.

Option Pricing

Author : Menachem Brenner
Publisher : Free Press
ISBN 13 :
Total Pages : 264 pages
Book Rating : 4.:/5 (321 download)

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Book Synopsis Option Pricing by : Menachem Brenner

Download or read book Option Pricing written by Menachem Brenner and published by Free Press. This book was released on 1983 with total page 264 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Options:Essential Concepts, 3rd Edition

Author : The Options Institute
Publisher : McGraw Hill Professional
ISBN 13 : 0071378634
Total Pages : 462 pages
Book Rating : 4.0/5 (713 download)

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Book Synopsis Options:Essential Concepts, 3rd Edition by : The Options Institute

Download or read book Options:Essential Concepts, 3rd Edition written by The Options Institute and published by McGraw Hill Professional. This book was released on 1999-07-12 with total page 462 pages. Available in PDF, EPUB and Kindle. Book excerpt: Get the acknowledged industry classic – revised and updated to deliver everything from time-honored options concepts to strategies for individual and institutional investors and traders. Every stock trader or market maker, whether currently involved with options or not, should own OPTIONS: ESSENTIAL CONCEPTS AND TRADING STRATEGIES, THIRD EDITION. Written by today's leading options practitioners—and edited by The Options Institute, the globally renowned Educational Division of the Chicago Board Options Exchange—OPTIONS leaves no stone unturned in delivering the most complete, authoritative, and easy-to-understand blueprint available for navigating the profitable twists and turns of today's options marketplace. No-nonsense, packed with useful information, and valuable as either an introductory textbook or a comprehensive fingertip reference source, this thoroughly revised and updated edition details: What options are, how they are priced, and how they are traded; Basic option trading strategies such as covered writing and protective puts; Advanced strategies involving LEAPS and the stock repair strategy; Options from three points of view: private investor, institutional investor, and market maker; How to use the power of the Internet for trading and detailed information gathering. The well-organized, thought-provoking, and dependable ideas found here will help you use options to increase the returns in virtually any investment mix. The comprehensive answers to a wide range of options questions, as well as insights into the latest options trading strategies, cover: Option Market History – From early transactions to latter-day innovations including LEAPS and index options, knowledge of options industry history will help you intuitively understand and trade profitably today; Essential Concepts – Fundamentals of options pricing theory and their relationship to market prediction, stock selection, and risk management; volatility explained; and introductory strategies from long call to covered strangle;Investing and Trading Strategies – Discussions of how to approach and understand "investing" strategies that focus on ownership of an underlying equity versus "trading". strategies with no intent to hold the underlying stock; plus, the function of market makers ; Real-Time Applications – Institutional case studies; how to use options as an indicator of price moves for an underlying stock; using the Internet for instantaneous trades and information; plus, a comprehensive glossary of option market terminology. OPTIONS, THIRD EDITION, takes the guesswork out of trading options and gives you the information you need to become a savvy options trader. So get your questions together, and use this step-by-step guidebook to develop option strategies that meet your investment objectives: hedging your stock market risk, increasing your portfolio income, or improving your trading results.

Option Volatility & Pricing: Advanced Trading Strategies and Techniques

Author : Sheldon Natenberg
Publisher : McGraw Hill Professional
ISBN 13 : 0071508015
Total Pages : 484 pages
Book Rating : 4.0/5 (715 download)

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Book Synopsis Option Volatility & Pricing: Advanced Trading Strategies and Techniques by : Sheldon Natenberg

Download or read book Option Volatility & Pricing: Advanced Trading Strategies and Techniques written by Sheldon Natenberg and published by McGraw Hill Professional. This book was released on 1994-08-22 with total page 484 pages. Available in PDF, EPUB and Kindle. Book excerpt: One of the most widely read books among active option traders around the world, Option Volatility & Pricing has been completely updated to reflect the most current developments and trends in option products and trading strategies. Featuring: Pricing models Volatility considerations Basic and advanced trading strategies Risk management techniques And more! Written in a clear, easy-to-understand fashion, Option Volatility & Pricing points out the key concepts essential to successful trading. Drawing on his experience as a professional trader, author Sheldon Natenberg examines both the theory and reality of option trading. He presents the foundations of option theory explaining how this theory can be used to identify and exploit trading opportunities. Option Volatility & Pricing teaches you to use a wide variety of trading strategies and shows you how to select the strategy that best fits your view of market conditions and individual risk tolerance. New sections include: Expanded coverage of stock option Strategies for stock index futures and options A broader, more in-depth discussion volatility Analysis of volatility skews Intermarket spreading with options

An Accuracy and Efficiency Study of the Black Option Pricing Model

Author : David Leonard Neff
Publisher :
ISBN 13 :
Total Pages : 220 pages
Book Rating : 4.:/5 (31 download)

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Book Synopsis An Accuracy and Efficiency Study of the Black Option Pricing Model by : David Leonard Neff

Download or read book An Accuracy and Efficiency Study of the Black Option Pricing Model written by David Leonard Neff and published by . This book was released on 1986 with total page 220 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Option Pricing

Author : Robert A. Jarrow
Publisher : Irwin Professional Publishing
ISBN 13 :
Total Pages : 272 pages
Book Rating : 4.:/5 (321 download)

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Book Synopsis Option Pricing by : Robert A. Jarrow

Download or read book Option Pricing written by Robert A. Jarrow and published by Irwin Professional Publishing. This book was released on 1983 with total page 272 pages. Available in PDF, EPUB and Kindle. Book excerpt:

An Empirical Analysis of Stock Option Valuation Methodologies in Closely Held U S Corporations

Author : Mike Fred Balm
Publisher : Universal-Publishers
ISBN 13 : 1599427192
Total Pages : 126 pages
Book Rating : 4.5/5 (994 download)

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Book Synopsis An Empirical Analysis of Stock Option Valuation Methodologies in Closely Held U S Corporations by : Mike Fred Balm

Download or read book An Empirical Analysis of Stock Option Valuation Methodologies in Closely Held U S Corporations written by Mike Fred Balm and published by Universal-Publishers. This book was released on 2009-05 with total page 126 pages. Available in PDF, EPUB and Kindle. Book excerpt: The introduction of fair value accounting for stock options has required private companies to apply stock option valuation methodologies that were designed to be applied to their public counterparts. The two recommended methodologies, the Black-Scholes formula and the Binomial Lattice model, require the valuator to provide an input for estimated volatility; for private companies that do not have a trading history there is limited guidance regarding the determination of volatility, which results in diverging and incorrect estimates. Based on a sample representing 178 companies who filed and completed an IPO in 2006, this study analyzed the accuracy of the recommended valuation methodologies when applied to closely held US corporations. The study outlines the importance of volatility to the value of the options and proceeds to document, by comparing the private (pre-IPO) and public (post-IPO) data, that in 51% of the cases the volatility was either over- or under-stated by more than 10%. In addition, the study shows a bias towards overstatement in the less than 10% variance group. The study further demonstrates that a marginal change in volatility has a significant impact on the company's total stock-based compensation expense and consequently misstates earnings.

Basic Black-Scholes: Option Pricing and Trading

Author : Timothy Falcon Crack
Publisher : Timothy Crack
ISBN 13 : 9780994103857
Total Pages : 264 pages
Book Rating : 4.1/5 (38 download)

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Book Synopsis Basic Black-Scholes: Option Pricing and Trading by : Timothy Falcon Crack

Download or read book Basic Black-Scholes: Option Pricing and Trading written by Timothy Falcon Crack and published by Timothy Crack. This book was released on 2014-08-05 with total page 264 pages. Available in PDF, EPUB and Kindle. Book excerpt: THE AUTHOR: Dr. Crack studied PhD-level option pricing at MIT and Harvard Business School, taught undergraduate and MBA option pricing at Indiana University (winning many teaching awards), was an independent consultant to the New York Stock Exchange, worked as an asset management practitioner in London, and has traded options for over 15 years. This unique mixture of learning, teaching, consulting, practice, and trading is reflected in every page. SUMMARY OVERVIEW: This revised third edition of Basic Black-Scholes gives extremely clear explanations of Black-Scholes option pricing theory, and discusses direct applications of the theory to option trading. The presentation does not go far beyond basic Black-Scholes for three reasons: First, a novice need not go far beyond Black-Scholes to make money in the options markets; Second, all high-level option pricing theory is simply an extension of Black-Scholes; and Third, there already exist many books that look far beyond Black-Scholes without first laying the firm foundation given here. The trading advice does not go far beyond elementary call and put positions because more complex trades are simply combinations of these. WHAT MAKES THIS BOOK SPECIAL OR UNIQUE?: -It contains the basic intuition you need to trade options for the first time, or interview for an options job. -Honest advice about trading: there is no simple way to beat the markets, but if you have skill this advice can help make you money, and if you have no skill but still choose to trade, this advice can reduce your losses. -Full immersion treatment of transactions costs (T-costs). -Lessons from trading stated in simple terms. -Stylized facts about the markets (e.g., how to profit from reversals, when are T-costs highest/lowest during the trading day, implications of the market for corporate control, etc.). -How to apply (European-style) Black-Scholes pricing to the trading of (American-style) options. -Leverage through margin trading compared to leverage through options. -Black-Scholes option pricing code for the HP17B, HP19B, and HP12C. -Two downloadable spreadsheets. The first allows the user to forecast T-costs for option positions using simple models. The second allows the user to explore option sensitivities including the Greeks. -Practitioner Bloomberg Terminal screenshots to aid learning. -Simple discussion of continuously-compounded returns. -Introduction to "paratrading" (trading stocks side-by-side with options to generate additional profit). -Unique "regrets" treatment of early exercise decisions and trade-offs for American-style calls and puts. -Unique discussion of put-call parity and option pricing. -How to calculate Black-Scholes in your head in 10 seconds (also in Heard on The Street: Quantitative Questions from Wall Street Job Interviews). -Special attention to arithmetic Brownian motion with general pricing formulae and comparisons to Bachelier (1900) and Black-Scholes. -Careful attention to the impact of dividends in analytical American option pricing. -Dimensional analysis and the adequation formula (relating FX call and FX put prices through transformed Black-Scholes formulae). -Intuitive review of risk-neutral pricing/probabilities and how and why these are related to physical pricing/probabilities. -Careful distinction between the early Merton (non-risk-neutral) hedging-type argument and later Cox-Ross/Harrison-Kreps risk-neutral pricing -Simple discussion of Monte-Carlo methods in science and option pricing. -Simple interpretations of the Black-Scholes formula and PDE and implications for trading. -Careful discussion of conditional probabilities as they relate to Black-Scholes. -Intuitive treatment of high-level topics e.g., bond-numeraire interpretation of Black-Scholes (where N(d2) is P*(ITM)) versus the stock-numeraire interpretation (where N(d1) is P**(ITM)).

Option Pricing and Strategies in Investing

Author : Richard M. Bookstaber
Publisher :
ISBN 13 :
Total Pages : 246 pages
Book Rating : 4.:/5 (31 download)

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Book Synopsis Option Pricing and Strategies in Investing by : Richard M. Bookstaber

Download or read book Option Pricing and Strategies in Investing written by Richard M. Bookstaber and published by . This book was released on 1981 with total page 246 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Option Strategies for Earnings Announcements

Author : Ping Zhou
Publisher : FT Press
ISBN 13 : 0132947404
Total Pages : 258 pages
Book Rating : 4.1/5 (329 download)

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Book Synopsis Option Strategies for Earnings Announcements by : Ping Zhou

Download or read book Option Strategies for Earnings Announcements written by Ping Zhou and published by FT Press. This book was released on 2012-10-15 with total page 258 pages. Available in PDF, EPUB and Kindle. Book excerpt: By trading on corporate earnings, investors can reliably profit in both up and down markets, while avoiding market risk for nearly the entire quarter. In this book, two leading traders and portfolio managers present specific, actionable techniques anyone can use to capture these sizable profits. Ping Zhou and John Shon have performed an unprecedented empirical analysis of thousands of stocks, reviewing tens of millions of data points associated with option prices, earnings announcement returns, and fundamentals. Their massive analysis has identified consistent opportunities associated with focusing on the magnitude of the market’s reaction to earnings, not its direction. Option Trading Set-Ups for Corporate Earnings News offers concrete guidance for improving the likelihood of making correct forecasts, and managing the risks of incorrect forecasts. It introduces several ways to exploit option trading opportunities around earnings news, discuss crucial issues that most retail investors haven’t considered, and explore aspects of earnings-related option trading that have never been empirically examined and documented before. For example, they identify hidden patterns and potential opportunities based on valuation, industry, volatility, analyst forecasts, seasonality, and trades that immediately follow earnings announcements. Simply put, trading on earnings reports offers immense profit opportunities, if you know how. This book provides incontrovertible facts and detailed strategies, not just theories and anecdotes!

Options

Author : Lane Hughston
Publisher :
ISBN 13 : 9781899332663
Total Pages : 408 pages
Book Rating : 4.3/5 (326 download)

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Book Synopsis Options by : Lane Hughston

Download or read book Options written by Lane Hughston and published by . This book was released on 1999 with total page 408 pages. Available in PDF, EPUB and Kindle. Book excerpt: A comprehensive and enlightening journey through the past, present and future of option pricing.

Report of the Special Study of the Options Markets to the Securities and Exchange Commission

Author : United States. Securities and Exchange Commission. Special Study of the Options Markets
Publisher :
ISBN 13 :
Total Pages : 1128 pages
Book Rating : 4.3/5 (91 download)

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Book Synopsis Report of the Special Study of the Options Markets to the Securities and Exchange Commission by : United States. Securities and Exchange Commission. Special Study of the Options Markets

Download or read book Report of the Special Study of the Options Markets to the Securities and Exchange Commission written by United States. Securities and Exchange Commission. Special Study of the Options Markets and published by . This book was released on 1979 with total page 1128 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Understanding Options

Author : Michael Sincere
Publisher : McGraw Hill Professional
ISBN 13 : 0071709703
Total Pages : 241 pages
Book Rating : 4.0/5 (717 download)

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Book Synopsis Understanding Options by : Michael Sincere

Download or read book Understanding Options written by Michael Sincere and published by McGraw Hill Professional. This book was released on 2006-10-13 with total page 241 pages. Available in PDF, EPUB and Kindle. Book excerpt: Illustrates profit and loss results for simple options and option spreads Explains the Greeks and their importance Outlines how options offer four ways to approach the market Includes a step-by-step walk-through of placing an order

Basic Black-Scholes

Author : Timothy Falcon Crack
Publisher :
ISBN 13 : 9780995117396
Total Pages : 284 pages
Book Rating : 4.1/5 (173 download)

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Book Synopsis Basic Black-Scholes by : Timothy Falcon Crack

Download or read book Basic Black-Scholes written by Timothy Falcon Crack and published by . This book was released on 2021-04 with total page 284 pages. Available in PDF, EPUB and Kindle. Book excerpt: [Note: eBook now available; see Amazon author page for details.] THE AUTHOR: Dr. Crack studied PhD-level option pricing at MIT and Harvard Business School, taught undergrad and MBA option pricing at Indiana University (winning many teaching awards), was an independent consultant to the New York Stock Exchange, worked as an asset management practitioner in London, and has traded options for over 20 years. This unique mix of learning, teaching, consulting, practice, and trading is reflected in every page. This revised 5th edition gives clear explanations of Black-Scholes option pricing theory, and discusses direct applications of the theory to trading. The presentation does not go far beyond basic Black-Scholes for three reasons: First, a novice need not go far beyond Black-Scholes to make money in the options markets; Second, all high-level option pricing theory is simply an extension of Black-Scholes; and Third, there already exist many books that look far beyond Black-Scholes without first laying the firm foundation given here. The trading advice does not go far beyond elementary call and put positions because more complex trades are simply combinations of these. UNIQUE SELLING POINTS -The basic intuition you need to trade options for the first time, or interview for an options job. -Honest advice about trading: there is no simple way to beat the markets, but if you have skill this advice can help make you money, and if you have no skill but still choose to trade, this advice can reduce your losses. -Full immersion treatment of transactions costs (T-costs). -Lessons from trading stated in simple terms. -Stylized facts about the markets (e.g., how to profit from reversals, when are T-costs highest/lowest during the trading day, implications of the market for corporate control, etc.). -How to apply European-style Black-Scholes pricing to the trading of American-style options. -Leverage through margin trading compared to leverage through options, including worked spreadsheet example. -Black-Scholes pricing code for the HP17B, HP19B, and HP12C. -Three downloadable spreadsheets. One allows the user to forecast T-costs for option positions using simple models. Another allows the user to explore option sensitivities including the Greeks. -Practitioner Bloomberg Terminal screenshots to aid learning. -Simple discussion of continuously-compounded returns. -Introduction to "paratrading" (trading stocks side-by-side with options to generate additional profit). -Unique "regrets" treatment of early exercise decisions and trade-offs for American-style calls and puts. -Unique discussion of put-call parity and option pricing. -How to calculate Black-Scholes in your head in 10 seconds (also in Heard on The Street: Quantitative Questions from Wall Street Job Interviews). -Special attention to arithmetic Brownian motion with general pricing formulae and comparisons to Bachelier (1900) and Black-Scholes. -Careful attention to the impact of dividends in analytical American option pricing. -Dimensional analysis and the adequation formula (relating FX call and FX put prices through transformed Black-Scholes formulae). -Intuitive review of risk-neutral pricing/probabilities and how and why these are related to physical pricing/probabilities. -Careful distinction between the early Merton (non-risk-neutral) hedging-type argument and later Cox-Ross/Harrison-Kreps risk-neutral pricing -Simple discussion of Monte-Carlo methods in science and option pricing. -Simple interpretations of the Black-Scholes formula and PDE and implications for trading. -Careful discussion of conditional probabilities as they relate to Black-Scholes. -Intuitive treatment of high-level topics e.g., bond-numeraire interpretation of Black-Scholes (where N(d2) is P(ITM)) versus the stock-numeraire interpretation (where N(d1) is P(ITM)). -Introduction and discussion of the risk-neutral probability that a European-style call or put option is ever in the money during its life.

Option Pricing and Investment Strategies

Author : Richard M. Bookstaber
Publisher : McGraw-Hill Companies
ISBN 13 :
Total Pages : 330 pages
Book Rating : 4.F/5 ( download)

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Book Synopsis Option Pricing and Investment Strategies by : Richard M. Bookstaber

Download or read book Option Pricing and Investment Strategies written by Richard M. Bookstaber and published by McGraw-Hill Companies. This book was released on 1991 with total page 330 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Index-option Pricing with Stochastic Volatility and the Value of Accurate Variance Forecasts

Author : Robert F. Engle
Publisher :
ISBN 13 :
Total Pages : 48 pages
Book Rating : 4.0/5 ( download)

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Book Synopsis Index-option Pricing with Stochastic Volatility and the Value of Accurate Variance Forecasts by : Robert F. Engle

Download or read book Index-option Pricing with Stochastic Volatility and the Value of Accurate Variance Forecasts written by Robert F. Engle and published by . This book was released on 1993 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: In pricing primary-market options and in making secondary markets, financial intermediaries depend on the quality of forecasts of the variance of the underlying assets. Hence, the gain from improved pricing of options would be a measure of the value of a forecast of underlying asset returns. NYSE index returns over the period of 1968-1991 are used to suggest that pricing index options of up to 90-days maturity would be more accurate when: (1) using ARCH specifications in place of a moving average of squared returns; (2) using Hull and White's (1987) adjustment for stochastic variance in Black and Scholes's (1973) formula; (3) accounting explicitly for weekends and the slowdown of variance whenever the market is closed.

Advanced Option Pricing Models

Author : Jeffrey Owen Katz
Publisher : McGraw-Hill
ISBN 13 : 9780071626446
Total Pages : 452 pages
Book Rating : 4.6/5 (264 download)

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Book Synopsis Advanced Option Pricing Models by : Jeffrey Owen Katz

Download or read book Advanced Option Pricing Models written by Jeffrey Owen Katz and published by McGraw-Hill. This book was released on 2005-02-01 with total page 452 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Advanced Option Pricing Models" details specific conditions under which current option pricing models fail to provide accurate price estimates and then shows option traders how to construct improved models for better pricing in a wider range of market conditions. Model-building steps cover options pricing under conditional or marginal distributions, using polynomial approximations and "curve fitting," and compensating for mean reversion. The authors also develop effective prototype models that can be put to immediate use, with real-time examples of the models in action.