# 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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### Upper bound option price in volatility dimension

All, I have a theoretical question about the value of an option when spot price goes to infinity as a function of volatility going to infinity. I know that for a call option: The option value ...
3k views

### Option greeks as dollar P&L

If I write the value of an option as O(S, K, T, V), where S is the underlying price, K is the strike, T is the time to expiry and V the implied volatility, how can I compute the dollar amount that I ...
72 views

### Finding the extrinsic value of an option with conditions

Background: Consider a spread option with the payoff $\max (P_{T} - HR\times G_T, 0)$, where $P$, $G$ are underlying prices and $HR$ is a constant. Let's also assume, that the correlation ...
158 views

### AFV Model Implementation for Convertible Bonds

I am reading the original AFV model paper for pricing convertible bonds. https://cs.uwaterloo.ca/~paforsyt/convert.pdf The paper is very technical and I am having trouble finding the actual PDE's to ...
352 views

### What is the analogue used by Hull to price European calls with known cash dividends?

From The Book by Hull: And Hull's comment: This rule is analogous to the one developed in Section 14.12 for valuing a European option on a stock paying known cash dividends. (In that case we ...
40 views

### Is the assignment of exercised options "truly" random

Everyone seems to say that assignment of exercised options is random; does it just appear random to an outside viewer or does the exchange pick a name from hat for assignment?
184 views

### Can gamma of an option be greater than its delta?

I have a currency pair usdinr put option with strike price at 73.5 INR, risk free rate 0, underlying price of 75.4025, days to expiry is 15 and iv is 5.9%. Delta of this option is -0.019 and gamma is ...
226 views

### Reason to hedge a European call option

Assume I write a call option on one share of the stock that I have. After selling the option I have an obligation to sell one share of the stock at some future time. I already have the stock, why ...
2k views

### What exactly does shifting a barrier in a barrier option mean and how does it hedge delta?

How exactly is shifting the barrier to hedge delta implemented in case of barrier options. Is it just changing the barrier, if so, how does it hedge delta or is it making the barrier a range like a ...
316 views

### Finite Difference Method in Greeks (Options)

I need a way to approximate the analytical formula of Greeks of a generic call option using the Finite Difference Method. For example, the FD method for Delta/Gamma is the following one: Now, I am in ...
3k views

### Where can I find best end of day option data? [duplicate]

Looking for accurate end of day option data. Preferably with Greeks. Any recommendations?
178 views

### Possible to use diffusion equation(s) to price derivatives with non-zero boundary conditions?

One of the reason the Black-Scholes can be transformed into the heat equation is that calls and puts have a zero boundary condition on their contingent payoffs. Define the terminal payoff condition ...
4k views

### Price of call/put is convex in $K$ (strike price)

Let $\lambda\in(0,1)$. Then $$C(T, \lambda K_1 + (1 - \lambda)K_2, S, t) \leq \lambda C(T, K_1, S, t) + (1 - \lambda)C(T, K_2, S, t)$$ $T$ - the maturity $K_1$,$K_2$ - Strike prices $S$ - stock ...