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European Option
In finance, the style or family of an option is the class into which the option falls, usually defined by the dates on which the option may be exercised. The vast majority of options are either European or American (style) options. These options—as well as others where the payoff is calculated similarly—are referred to as " vanilla options". Options where the payoff is calculated differently are categorized as " exotic options". Exotic options can pose challenging problems in valuation and hedging. American and European options The key difference between American and European options relates to when the options can be exercised: * A European option may be exercised only at the expiration date of the option, i.e. at a single pre-defined point in time. * An American option on the other hand may be exercised at any time before the expiration date. For both, the payoff—when it occurs—is given by * \max\, for a call option * \max\, for a put option where K is the strik ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Option (finance)
In finance, an option is a contract which conveys to its owner, the ''holder'', the right, but not the obligation, to buy or sell a specific quantity of an underlying asset or instrument at a specified strike price on or before a specified date, depending on the style of the option. Options are typically acquired by purchase, as a form of compensation, or as part of a complex financial transaction. Thus, they are also a form of asset (or contingent liability) and have a valuation that may depend on a complex relationship between underlying asset price, time until expiration, market volatility, the risk-free rate of interest, and the strike price of the option. Options may be traded between private parties in '' over-the-counter'' (OTC) transactions, or they may be exchange-traded in live, public markets in the form of standardized contracts. Definition and application An option is a contract that allows the holder the right to buy or sell an underlying asset or financia ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Binomial Options Model
In finance, the binomial options pricing model (BOPM) provides a generalizable numerical method for the valuation of options. Essentially, the model uses a "discrete-time" ( lattice based) model of the varying price over time of the underlying financial instrument, addressing cases where the closed-form Black–Scholes formula is wanting, which in general does not exist for the BOPM. The binomial model was first proposed by William Sharpe in the 1978 edition of ''Investments'' (), and formalized by Cox, Ross and Rubinstein in 1979 and by Rendleman and Bartter in that same year. For binomial trees as applied to fixed income and interest rate derivatives see . Use of the model The Binomial options pricing model approach has been widely used since it is able to handle a variety of conditions for which other models cannot easily be applied. This is largely because the BOPM is based on the description of an underlying instrument over a period of time rather than a single point ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Bond (finance)
In finance, a bond is a type of Security (finance), security under which the issuer (debtor) owes the holder (creditor) a debt, and is obliged – depending on the terms – to provide cash flow to the creditor (e.g. repay the principal (i.e. amount borrowed) of the bond at the Maturity (finance), maturity date and interest (called the coupon (bond), coupon) over a specified amount of time.) The timing and the amount of cash flow provided varies, depending on the economic value that is emphasized upon, thus giving rise to different types of bonds. The interest is usually payable at fixed intervals: semiannual, annual, and less often at other periods. Thus, a bond is a form of loan or IOU. Bonds provide the borrower with external funds to finance long-term investments or, in the case of government bonds, to finance current expenditure. Bonds and Share capital, stocks are both Security (finance), securities, but the major difference between the two is that (capital) stockholders h ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Dirty Price
The price of a bond is the present value of its future cash-flows. To avoid the impact of the next coupon payment on the price of a bond, this cash flow is excluded from the price of the bond and is called the accrued interest. In finance, the dirty price is the price of a bond including any interest that has accrued since issue of the most recent coupon payment. This is to be compared with the clean price, which is the price of a bond excluding the accrued interest. : When bond prices are quoted on a Bloomberg Terminal, Reuters or FactSet they are quoted using the clean price. Bond pricing Bonds, as well as a variety of other fixed income securities, provide for coupon payments to be made to bond holders on a fixed schedule. The dirty price of a bond will decrease on the days coupons are paid, resulting in a saw-tooth pattern for the bond value. This is because there will be one fewer future cash flow (i.e., the coupon payment just received) at that point. To separate out ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Bond Option
In finance, a bond option is an option to buy or sell a bond at a certain price on or before the option expiry date. These instruments are typically traded OTC. *A European bond option is an option to buy or sell a bond at a certain date in future for a predetermined price. *An American bond option is an option to buy or sell a bond ''on or before'' a certain date in future for a predetermined price. Generally, one buys a call option on the bond if one believes that interest rates will fall, causing an increase in bond prices. Likewise, one buys the put option if one believes that interest rates will rise. One result of trading in a bond option, is that the price of the underlying bond is "locked in" for the term of the contract, thereby reducing the credit risk associated with fluctuations in the bond price. Valuation Bonds, the underlyers in this case, exhibit what is known as pull-to-par: as the bond reaches its maturity date, all of the prices involved with the bond be ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Currency
A currency is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins. A more general definition is that a currency is a ''system of money'' in common use within a specific environment over time, especially for people in a nation state. Under this definition, the British Pound sterling (£), euros (€), Japanese yen (¥), and U.S. dollars (US$) are examples of (government-issued) fiat currencies. Currencies may act as stores of value and be traded between nations in foreign exchange markets, which determine the relative values of the different currencies. Currencies in this sense are either chosen by users or decreed by governments, and each type has limited boundaries of acceptance; i.e., legal tender laws may require a particular unit of account for payments to government agencies. Other definitions of the term ''currency'' appear in the respective synonymous articles: banknote, coin, and money. Th ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Underlying
In finance, a derivative is a contract between a buyer and a seller. The derivative can take various forms, depending on the transaction, but every derivative has the following four elements: # an item (the "underlier") that can or must be bought or sold, # a future act which must occur (such as a sale or purchase of the underlier), # a price at which the future transaction must take place, and # a future date by which the act (such as a purchase or sale) must take place. A derivative's value depends on the performance of the underlier, which can be a commodity (for example, corn or oil), a financial instrument (e.g. a stock or a bond), a price index, a currency, or an interest rate. Derivatives can be used to insure against price movements ( hedging), increase exposure to price movements for speculation, or get access to otherwise hard-to-trade assets or markets. Most derivatives are price guarantees. But some are based on an event or performance of an act rather than a pri ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Dividend
A dividend is a distribution of profits by a corporation to its shareholders, after which the stock exchange decreases the price of the stock by the dividend to remove volatility. The market has no control over the stock price on open on the ex-dividend date, though more often than not it may open higher. When a corporation earns a profit or surplus, it is able to pay a portion of the profit as a dividend to shareholders. Any amount not distributed is taken to be re-invested in the business (called retained earnings). The current year profit as well as the retained earnings of previous years are available for distribution; a corporation is usually prohibited from paying a dividend out of its capital. Distribution to shareholders may be in cash (usually by bank transfer) or, if the corporation has a dividend reinvestment plan, the amount can be paid by the issue of further shares or by share repurchase. In some cases, the distribution may be of assets. The dividend received by ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Capital Stock
In economics, capital goods or capital are "those durable produced goods that are in turn used as productive inputs for further production" of goods and services. A typical example is the machinery used in a factory. At the macroeconomic level, "the nation's capital stock includes buildings, equipment, software, and inventories during a given year." The means of production is as a "... series of heterogeneous commodities, each having specific technical characteristics ..." "capital goods", are one of the three types of intermediate goods used in the production process, the other two being land and labour. The three are also known collectively as "primary factors of production". This classification originated during the classical economics period and has remained the dominant method for classification. Capital can be increased by the use of a production process (see production function and factors of production). Outputs of the production process are normally classifi ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
In The Money
''In the Money'' is a 1958 American comedy film directed by William Beaudine and starring The Bowery Boys. The film was released on February 16, 1958, by Monogram Pictures, Allied Artists Pictures and is the 48th and final film in the series. It was directed by William Beaudine and written by Al Martin (screenwriter), Al Martin and Elwood Ullman. Plot Sach is hired to escort Gloria, a poodle, on a trip to London, England. Unbeknownst to Sach, the people who hired him are international smugglers, who have hidden some diamonds under some false fur on Gloria. The rest of The Bowery Boys, suspicious of Sach's good fortune, think that "Gloria" must be a dangerous female. They decide to sneak onto Sach's London-bound ship, only to wind up swabbing the deck as punishment for being stowaways. Once in England, Sach and the boys soon catch on to the smugglers' scheme. Inspector Herbert Saunders, a senior detective of Scotland Yard, accuses Sach and his gang of being the smugglers. Cast Th ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Calibrate
In measurement technology and metrology, calibration is the comparison of measurement values delivered by a device under test with those of a calibration standard of known accuracy. Such a standard could be another measurement device of known accuracy, a device generating the quantity to be measured such as a voltage, a sound tone, or a physical artifact, such as a meter ruler. The outcome of the comparison can result in one of the following: * no significant error being noted on the device under test * a significant error being noted but no adjustment made * an adjustment made to correct the error to an acceptable level Strictly speaking, the term "calibration" means just the act of comparison and does not include any subsequent adjustment. The calibration standard is normally traceable to a national or international standard held by a metrology body. BIPM Definition The formal definition of calibration by the International Bureau of Weights and Measures (BIPM) is the foll ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Exercise (options)
The owner of an option contract has the right to exercise it, and thus require that the financial transaction specified by the contract is to be carried out immediately between the two parties, whereupon the option contract is terminated. When exercising a call option, the owner of the option purchases the underlying shares (or commodities, fixed interest securities, etc.) at the strike price from the option seller, while for a put option, the owner of the option sells the underlying to the option seller, again at the strike price. Styles The option style, as specified in the contract, determines when, how, and under what circumstances, the option holder may exercise it. It is at the discretion of the owner whether (and in some circumstances when) to exercise it. * European – European-style option contracts may only be exercised at the option's expiration date. Thus they can never be worth more than an American-style option with the same underlying strike price and expirati ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
