Questions tagged [derivatives]

A financial contract whose payoff is linked to the evolution of an underlying security.

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526 views

Delta Hedging: Clarification example of the book “Hull, Options, Futures, and Other Derivatives” [closed]

By "Hull, Options, Futures, and Other Derivatives": Suppose that, in figure,the stock price is \$100 and the option price is \$10. Imagine an investor who has sold 20 call option ...
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2answers
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Detect trend of an index

My question is about determining the trend and it can break down to 3 parts. To clarify, a trend in my point of view, and in simple form, is the last close at time t relative to its time reference, i....
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1answer
78 views

Cash as Collateral in OTC Market

In OTC market Collateral Posting as cash is normal, so when it is said Collateral Posted as USD CASH Does that mean Actual amount of currency is posted electronically (or any security is posted) ...
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2answers
43 views

What would be the issue price of the following contract?

Stock currently A has a price equal to 100. Stock B also currently has a price of 100. The contract has a maturity $\mu$ of one year. At maturity the payout is the max price of either A or B. What is ...
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1answer
2k views

Compute I-spread from ASW-spread (or vice versa)

The I-spread ("mid swap spread" or yield-yield spread) is a standlone measure of credit risk, a security against matched maturity vanilla swap rate. Consider a package in which the investor receives ...
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526 views

Is the code of my binary call option pricer (using explicit finite difference, backward scheme) correct? [closed]

I am using explicit finite difference (backward scheme) to price a binary call option. Here is my MATLAB code: ...
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1answer
1k views

Calculating arbitrage- S&P 500 stocks vs S&P 500 Index future?

How exactly would I go about investigating whether the S&P 500 stocks were currently over-valued compared with the price of the S&P 500 Index futures contract? Is it just a case of taking each ...
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1answer
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Futures Exchanges and marking to market [closed]

When a futures exchange marks to the market, does it "help" the losing side or winning side. According to my knowledge, it makes the losing side lose even more by deducting from their margin account? ...
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1answer
576 views

Log-moneyness definition [closed]

Define the time-0 log-moneyness of a call on stock $S$ with strike $K$ and expiry $T$ to be: $$\log(S(0)\exp(rT)/K)$$ What does it mean for the strikes K to be at-the-log-moneyness?? I guessed this ...
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1answer
301 views

Increasing the correlation of two asset reduce the value of spread option.

We know the payment function of Spread option is $$\max\{X_T - Y_T-K,0\}$$ here $$d X_t = (\mu_x - D_x)X_t dt + \sigma_xX_td W^x_t$$ $$d Y_t = (\mu_y - D_y)Y_t dt + \sigma_yY_td W^y_t$$ $$d W^x_td W^...
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1answer
892 views

Why do we need derivatives? [closed]

I read somewhere that derivatives are the biggest weapons of financial destruction. Why do we need derivatives? If exploiting risk-proneness of people to make profit is the goal, why don't we stop ...