SECOND CITY OPTIONS: A Case Study on Index Options[1] Don M. Chance and Michael L. Hemler (Version: August 30, 2011) Second City Options (SCO) is a small firm that specializes in option trading. Employing 35 people, SCO is located on LaSalle Street in the Chicago financial district. It is a member firm of the Chicago Board Options Exchange (CBOE), where it trades options on stocks and stock indices. It is also a member firm of the Chicago Mercantile Exchange Group (CME Group), where it trades
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S&P/ASX 200 VIX (ASX Code: XVI) is a real-time index that reflects the market’s expected volatility in the Australian benchmark equity index, the S&P/ASX 200. Real-time bid/ask prices for S&P/ASX 200 (XJO) put and call options are used to derive a weighted average of the implied volatility being incorporated into the options. Two maturities are used with the nearby having at least a week until expiry. The volatility of the options closest to maturity is interpolated with that of the options farthest
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she has the possibility to sell the options, then she should go for the stock options instead of the cash. To calculate the value of the stock options today we have to find the volatility of the stock. In this case we are going to calculate the “historical implied volatility”, which refers to the implied volatility observed from historical prices of the stock. We have the historical price of the stock for the last 10 years so we calculate the gains for each value compared with the previous
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time value of an option = difference between actual call price and intrinsic value as time approaches expiration date, time value goes to zero 21-2 Determinants of Option Values Call + – + + + – Put – + + + – + Stock price Exercise price Volatility of stock price Time to expiration Interest rate Dividend rate of stock 21-3 Binomial Option Pricing consider a stock that currently sells at S0 the price an either increase by a factor u or fall by a factor d (probabilities are irrelevant)
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How to benefit from stock futures You are bullish on a stock say Satyam, which is currently quoting at Rs 280 per share. You believe that in one month it will touch Rs 330. Question: What do you do? Answer: You buy Satyam. Effect: It touches Rs 330 as you predicted – you made a profit of Rs 50 on an investment of Rs 280 i.e. a Return of 18% in one month – Fantastic!! Wait: Can it get any better? Yes!! Question: What should you do? Answer: Buy Satyam Futures instead. Effect: On
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CHARACTERISTICS AND RISKS OF STANDARDIZED OPTIONS February 1994 1997 through 2012 Supplements included BATS Exchange, Inc. 8050 Marshall Drive Lexena, Kansas 66214 C2 OPTIONS EXCHANGE, INCORPORATED 400 South LaSalle Street Chicago, Illinois 60605 CHICAGO BOARD OPTIONS EXCHANGE, INCORPORATED 400 South LaSalle Street Chicago, Illinois 60605 INTERNATIONAL SECURITIES EXCHANGE, LLC 60 Broad Street New York, New York 10004 NASDAQ OMX BX, INC. 101 Arch Street Boston, Massachusetts 02110 NASDAQ
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1. Introduction: We know the fact that low interest rate affects stock market price. Low interest rate decreases the cost of capital and increases the confidence of investors. The equity risk premium is the "extra return" that investors collectively demand for investing their money in stocks instead of holding it in a risk less or close to risk less investment. As a consequence, equity risk premium reflects both investor hopes and fears about stocks, rising as the fear factor increases
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BFF9515 Options, Futures and Risk management Group assignment Semester 1, 2014 Due date: 16.05.2014 BFF5915 Group Assignment Part 1 1. Compute Beta * Method: First, compute the returns of each stocks and the return of the index. They can be calculated using excel with the formula: (current price / the previous price) – 1, Second, use covariance and variance function in excel to calculate the beta of each stock. Third, multiply each beta with the corresponding weight to calculate
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interested in puts on the yen, puts on the Nikkei would be much more widely demanded. 2. Profits to be made from buying options (sourcing volatility) in institutional markets and resell to retail customers 3. New markets could quickly become satiated. The prices of the currency warrants fell quickly from the initial deal levels Exhibit 1 daily implied volatilities of exchange-listed yen currency warrants 1988, IFR reported the first of a series of recent Eurobonds whose redemption values at maturity
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Asset Value and Volatility Estimation for Corporate Credit Rating 1009611462 LUFEI Xiaoxin 1009611301 HE Yao Abstract The market-based credit models make use of market information such as equity values to estimate a firm’s credit risk. The Merton model and the Black-Cox model are two popular models that link asset value with equity value, based on the option pricing theories. Under these models, the distance to default can be derived and thus the default probability can be mapped to as long
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