Derivate
« Previous EntriesEuropean-style option
Friday, October 28th, 2011An option which can only be exercised on expiration.
Elasticity
Tuesday, October 25th, 2011Properly a measure of the percentage change in the option premium for a 1% change in the asset price. Sometimes loosely used as a synonym for delta (delta strictly measures the absolute change in the option premium for a one unit change in the underlying). Because elasticity is usually significantly positive (a 1% change in [...]
Dynamic hedging
Monday, October 24th, 2011Replication of the payoff of a portfolio long the underlying and long a put by continuous delta hedging. It started as a theory of Hayne Leland and Mark Rubenstein on the back of the Black-Scholes model. It was used to provide put protection for equity portfolios at a time when portfolio puts were not available. [...]
Delta positive
Saturday, October 22nd, 2011Call options are said to be delta positive because their value increases by the value of delta for a one unit rise in the price of the underlying. Put options are said to be delta negative because their value decreases in value by delta for every one unit rise in the price of the underlying. [...]
Delta neutral
Thursday, October 20th, 2011An option portfolio delta-hedged such that it has no exposure to small moves in the price of the underlying. In practice, since delta is altered by all but the very smallest changes in the price of the underlying, by the volatility of that price, by the maturity of the option, by how close-to-the-money the option [...]
Delta hedging
Wednesday, October 19th, 2011Delta is the neutral hedge ratio derived from the Black-Scholes model the ratio of underlying asset to options necessary to create the risk-free portfolio that is at the heart of the Black-Scholes option pricing formula. So the delta of a stock option indicates the number of shares needed to hedge a position in an option [...]
Basic options terms
Tuesday, October 18th, 2011ome of this is necessary to express the basic operation of options contracts (such as ‘premium’ or ‘exercise price’) and some of it is the result of the mathematical complexity of option pricing. In particular, it is impossible for any potential user of options to avoid contact with the ‘Greeks’ a set of Greek letters [...]
Europe regulations: Commission warned of dangers of derivatives reform
Monday, September 20th, 2010The G20 group of industrialised and developing countries has agreed that regulation of the derivatives market needs to be strengthened to prevent a repeat of the financial crisis, when banks built up excessive levels of risk through trading in derivatives such as credit default swaps and collateralised debt obligations. It agreed last year that derivatives [...]
ISDA verteidigt Kreditderivate
Saturday, December 19th, 2009– Der Vorwurf vieler Kritiker lautet: Mit CDS-Kontrakten werden Unternehmen bewusst in die Pleite getrieben, weil die Derivatehändler mehr verdienen bei einer gelungenen Restrukturierung. Diese Behauptung wurde aufgestellt beim Autobauer General Motors (GM), ist aber heute noch populär. Goldman Sachs treibe die US-Truckinggesellschaft YRC Worldwide mit Kreditderivaten an den Rand der Pleite, warf James Hoffa, [...]
Banken greifen nach OTC-Dienstleister CHF.Clearnet
Friday, September 11th, 2009Die Bemühungen der Banken, ihre außerbörslichen Wertpapiertransaktionen durch die Einschaltung einer zentralen Clearing-Partei sicherer zu gestalten, nehmen allem Anschein nach konkrete Formen an. So zeichnet sich nun endgültig der seit langem gewollte Einstieg eines Bankenkonsortiums bei dem auf das Settlement und Clearing von Wertpapiertransaktionen spezialisierte Unternehmen LCH.Clearnet Group ab. Darauf deuten zumindest die jüngsten Aussagen [...]
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