# Questions tagged [options]

A contract that gives the owner the right, but not the obligation, to buy or sell a security at a fixed price in the future.

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29 views

### Calculate the size of the up move from volatility for Binomial model

I'm given a European Put option, current and exercise prices, $p$ and $P$ and stock volatility $q$. What is the way of finding the size of the up move from the problem?
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### Option pricing with risk-neutral approach

Problem Given $Y_t$ price of a stock (no-dividents), and a derivative paying $Y_T^2$ at maturity $T$, evaluate the price of the instrument now using risk-neutral approach and check that it satisfies ...
38 views

### Compute call option price given two stock price scenarios? [closed]

I was asked the below question, but wonder if enough information was given: For an AAPL European call option expiring in 1 year, strike price is $159.60 AAPL is now \$144.00. In one year, it can go ...
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### Easy, but doubts - Annualize daily turnover

I am fairly certain I am correct but I just want to double-check on portfolio turnover calculation. I need to annualize the daily turnover rate. To calculate, the daily turnover, I am using the ...
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### Put call parity without dividend confusion [closed]

If the underlying asset pays no dividend, then CE(t,K)- PE(t,K) = S(t) - Ke-r(T-t) Proof for the above formula: First, we have Portfolio 1. At time t, long 1 call option and short 1 put option, so ...
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### Construct an arbitrage portfolio using combination of European call options [closed]

Suppose that the continuous compounding rate is r = 0.05 and the maturity time T=1. How can I construct a portfolio using some of the European call options below and the bank account to find an ...
54 views

### Prove that value of Vanilla put option increases when time to maturity increases [closed]

Given two vanilla put options with the same strike price K but different maturity dates T'<T. If the interest rate r = 0 between T' and T, how can I prove that P(t, T') < P(t, T) ?
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### Arithmetic Asian options on two commodities

I am pricing a November-December Asian option on steel via Monte Carlo simulation. I intend to simulate daily prices for the Nov contract from today through end of November, and from today through end ...
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### Optimizing Options Portfolio

I’m working on a model which creates a portfolio of options. The model has an alpha from an options trade for 1 period using several different underlying stocks. Would Mean Variance optimization still ...
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### Exposure calculation - modeling/Valuation/Validation [closed]

Hey I would like to know a bit more about calculating exposure. We need to simulate risk factors such as interest rates or FX rate using different models (what are the most popular for each type of ...
123 views

### Why is call option value same as portfolio value at all times in Black Scholes model?

Following is a part of the text from Steven Shreve Stochastic Calculus for Finance II, for pricing the European Option in Black Scholes model. The argument is that today I start by selling a European ...
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### Why are options studied separately from a portfolio of stocks and bonds?

I have just started studying finance and stochastic calculus so apologies if this question is too naive. I was first introduced to stocks and bonds as risk and riskless investment assets. Then a new ...
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### Cash less exercise and redemption feature in SPAC warrants

Public and private warrants of a SPAC post merger (Initial Business Combination or IBC) are often very similar. Notable differences are 1) cashless exercise of the private warrants and 2) redemption ...
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### Why doesn't the value of an in-the-money option increase approaching expiration? [closed]

I know it is a pretty basic question and I can get this result with BS, however I don't understand it conceptually. As the time approaches maturity, it is less likely to end out of the money, so I ...
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### What are the different payments in a callable spread option? how is it structured

I encountered a product that's called CSO (Callable Spread Option). I would like to understand how this product works and how the payments are done in both ways? what about the callability of the ...
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### What is the cause of this option chain anomaly?

LAST CHG BID   ASK VOL OPEN INT. STRIKE 363.15   1.35    359.80      361.40    6          12          420.00 What's peculiar is that the price is significantly higher than the ask price. The question ...
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### Option Pricing - Incorrect price outcome for Out of the Money (OTM) calls

I have the options data for a stock - ...
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### Selling American calls before ex date vs. exercising

From reading Hull OFOD (among other references), I understand that early exercise makes sense for an American call option at time $t_n$ when $$D_n > K\Big[1-e^{-r\big(T-t_n\big)}\Big]$$ for a call ...
116 views

### Deriving Bachelier Greeks

I am working on the Bachelier Model with r not equal to 0 as described in the first and most upvoted answer in following link: Bachelier model call option pricing formula This is fairly easy to code ...
71 views

### is implied volatility derived from the option bid quote or the option ask quote?

I got SPX option prices from three different market data sources. In all of them, I can see bid and ask quotes. However, there is only one implied volatility. Does this implied volatility correspond ...