Posted by R. MAK. on August 15, 2009 ·
In the Black-Scholes model, we can find the price of the option by the formulas below. In these, stock price is denoted by S, strike price is denoted by K, time to maturity is denoted by T , dividend rate is denoted by q, risk-free interest rate is denoted by…
Posted by R. MAK. on August 11, 2009 ·
In finance, a general term that is used to denote the class into which the option falls is the style or family of an option. It is 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 known as “vanilla options”. Options where the payoff is calculated differently are referred to as “exotic options”. Challenging problems in valuation and hedging can…
