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OPTIONS
Lower Bounds for European Options: max{[S0 PV(D)] PV(X), 0} < c;
max{PV(X) [S0 PV(D)], 0} < p;
Put-Call Parity: p + [S0 PV(D)] = c + PV(X).
Bounds on American Options: [S0 PV(D)] X < C P < S0 PV(X).
fu fd
Delta: = .
Su Sd
e rt d
Risk-Neutral Probability: p = .
ud
One-Period European Option Price:
fE = S PV(risk-free payoff) = [pf u + (1 p)f d]ert.