Skip to main content
2 votes
Accepted

Intuition behind short 1/2 stock in option value - Paul Wilmott Quant Finance Chapter 3.3

This is a classic interview question, btw. Probabilities you mention are "subjective" hence are irrelevant for option pricing. You need to use risk neutral stock migration probabilities, ...
achirikhin's user avatar
1 vote

Why would you take a Loan when trying to Illustrate a Riskless Hedge?

I don't really have much to add to the other comments, but I just want to emphasize the general principle of opportunity cost and the intuition behind it. You should only invest in something if you ...
LongTimeLurker's user avatar
1 vote
Accepted

Why would you take a Loan when trying to Illustrate a Riskless Hedge?

More generally, in finance almost all replication arguments always assume that you have no cash to begin with (usually also there are simplifications such as assuming that there is no credit risk and ...
user68819's user avatar
  • 505
1 vote
Accepted

Up and Down Multiplicative Factors of the Binomial Option Pricing Model

For the first question (form of up/down factors), CRR uses the second form you described. This answer has some discussion on the matter -- a takeaway from that is that there are various choices with ...
Rylan's user avatar
  • 605
1 vote
Accepted

How to price a buffet or, how to price a subscription?

Not an answer, more of a opinion If you would like to price it the "quant" way, it seems what you are suggesting is a call option on $n$ products with a month to expiry (an analogy on the ...
KaiSqDist's user avatar
  • 1,394

Only top scored, non community-wiki answers of a minimum length are eligible