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Results tagged with derivatives
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user 3511
A financial contract whose payoff is linked to the evolution of an underlying security.
-4
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1
answer
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Why do we need derivatives? [closed]
I read somewhere that derivatives are the biggest weapons of financial destruction. Why do we need derivatives? … Derivatives also entail complicated math for their pricing while stock prices are usually modelled as Brownian motion. Why do we go for such a dangerous complication? …
- 671
7
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2
answers
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Radon Nikodym derivative when changing numeraires
I note from Wikipedia that if $Q$ and $Q^N$ are two measures corresponding to numeraires $M$ and $N$, then the Radon Nikodym derivative is given by: $$\frac{dQ^N}{dQ} = \frac{M(0)}{M(T)}\frac{N(T)}{N( …
- 671
0
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0
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How does modeling provide an edge to banks in the derivatives space?
Thus, for liquid derivatives, the prices are market-driven rather than model-driven.
Of course for exotic products, the Carr-Madan formula can help us calculate the prices from the call-put prices. … In other words, how does having sophisticated quants provide an edge to the investment banks dealing with derivatives? …
- 671