Derivados Flashcards
(25 cards)
Assumptions Binomial Model
Replicating (identifiable and investable), no market frictions, short selling allowed and borrow/lend at rf
Call Overvalued
Buy Call, Buy h shares, borrow
P>0
Buy Put, Buy h shares, lend
% changes in Stock Price
Normal Distribution
Returns
Lognormal Distribution
Continous Compound Returns
Normal Distribution
Stock Prices
Lognormal Distribution
Assumptions BSM
No transaction costs, no arbitrage opportunities, trading continous, borrow/lend rf constant, constant and known volatility, liquid underlying and short selling, continous price movements
N(.)
Risk-neutral probability and has standard normal cumulative
N(d2)
Probability a Call expires ITM
N(-d2)
Conditional Probability a Put expires ITM
Carrying benefits
baja d1, d2
Delta
Change in the value of the option for a change in the price of the underlying
DeltaC + GammaC
For small changes in S
Implied Volatility
Future volatility inferred by movements of the option price
Gamma
Change in option Delta by a change in the price of the underlying (measure of the curvature)
Gamma Characteristics
Positiva y largest ATM, measure the risk once a portfolio is delta neutral, no cambia por cambios en Puts y Calls
Theta
Cambio en C y P por cambio en tiempo
Rho en Call- y Puts
Positive, Negative
Si sube risk free (Rho)
Sube call, baja put
Carry arbitrage
Ganancia al final
Carry arbitrage reverse
Ganancia hoy (Fo < Fmv)
American Style Puts
Early excercise results in a premium over european style options
Vega ATM
More Volatile
