Tagged Questions

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Common point between IR and Vol option pricing models?

What is the common point between pricing models on options on Interest Rates and options on Volatility?
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Effect of interest rate on options prices

This might be another basic derivatives question. When interest rate rises, stock prices generally fall. Assuming an option's underlying is a stock, this should lower the option's price as well. ...
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Value options when the currency’s risk free rate is negative?

How would you handle a negative interest rate in index/equity options valuation? An example would be negative rates for short term maturities for Swiss Frank (CHF).
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Replicating portfolio and risk-neutral pricing for interest rate options

For equity options, the pricing of options depends on the existence of a replicating portfolio, so you can price the option as the constituents of that replicating portfolio. However, I am not seeing ...
Usimg the put-call parity $C - P = S - K · e^{-rt}$ I tried to estimate the value of $e^{-rt}$, the present value of a zero-coupon bond that matures to 1 in time $t$: $e^{-rt} = (P - C + S) / K$ ...
Put-call parity is given by $C + Ke^{-r(T-t)} = P + S$. The variables $C$, $P$ and $S$ are directly observable in the market place. $T-t$ follows by the contract specification. The variable $r$ is ...