Search results “Options pricing models”

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CA PAVAN KARMELE

http://optionalpha.com - Option traders often refer to the delta, gamma, vega and theta of their option position as the "Greek" which provide a way to measure the sensitivity of an option's price. However, it's important that you realize that the "Greeks" don't determine pricing, just reflect what could happen in pricing changes for moves in the stock, implied volatility, etc.
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- Kirk & The Option Alpha Team

Views: 185244
Option Alpha

This video explains about the 2 option pricing models used in the derivatives market

Views: 5771
MODELEXAM

An introduction into option pricing. Understanding how option pricing works and the components that determine an option price. For more information visit www.tradesmartu.com

Views: 23322
TradeSmart University

Introduction to the binomial option pricing model, delta hedging, and risk-neutral valuation.

Views: 44793
Matt Brigida

Introduces the Black-Scholes Option Pricing Model and walks through an example of using the BS OPM to find the value of a call. Supplemental files (Standard Normal Distribution Table, BS OPM Formulas, and BS OPM Spreadsheet) are provided with links to the files in Google Documents.
tinyurl.com/Bracker-StNormTable
tinyurl.com/Bracker-BSOPM
tinyurl.com/Bracker-BSOPMspread

Views: 243238
Kevin Bracker

Training on Option Pricing Models using R by Vamsidhar Ambatipudi

Views: 1934
Vamsidhar Ambatipudi

Training on Option Pricing Models using R by Vamsidhar Ambatipudi

Views: 514
Vamsidhar Ambatipudi

MIT 18.S096 Topics in Mathematics with Applications in Finance, Fall 2013
View the complete course: http://ocw.mit.edu/18-S096F13
Instructor: Stephen Blythe
This guest lecture focuses on option price and probability duality.
License: Creative Commons BY-NC-SA
More information at http://ocw.mit.edu/terms
More courses at http://ocw.mit.edu

Views: 44007
MIT OpenCourseWare

We price an American put option using 3 period binomial tree model. We cover the methdology of working backwards through the tree to price the option in multi-period binomial framework. Empahsis is also placed on early exercise feature of American option and it's significance in pricing. Although not a prerequisite, viewers can look at the tutorial on risk neutral valuation in binomial model for understanding how to calculate risk neutral probability of stock price going up.

Views: 77442
finCampus Lecture Hall

Watch an overview of using theoretical pricing models to predict the outcome of an options contract, including examples
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Topic: option payoff, Black Scholes, option pricing model, option pricing, premium, price, strike price, option probability

Views: 707
CME Group

Ross is best known for the development of the arbitrage pricing theory (mid-1970s) as well as for his role in developing the binomial options pricing model (1979; also known as the Cox–Ross–Rubinstein model). He was an initiator of the fundamental financial concept of risk-neutral pricing. In 1985 he contributed to the creation of the Cox–Ingersoll–Ross model for interest rate dynamics. Such theories have become an important part of the paradigm known as neoclassical finance.
In finance, arbitrage pricing theory (APT) is a general theory of asset pricing that holds that the expected return of a financial asset can be modeled as a linear function of various factors or theoretical market indices, where sensitivity to changes in each factor is represented by a factor-specific beta coefficient. The model-derived rate of return will then be used to price the asset correctly—the asset price should equal the expected end of period price discounted at the rate implied by the model. If the price diverges, arbitrage should bring it back into line.

Views: 430
scottab140

Basics of Options Pricing http://www.financial-spread-betting.com/ PLEASE LIKE AND SHARE THIS VIDEO SO WE CAN DO MORE! Options pricing can be pretty complicated; you have the Black-Scholes formula, you have those big derivative based equations but as traders we just want to break down into the big fundamentals basics so we can the major components that effects the options price we are trading.
We have 2 components to an options price
1) We have the intrinsic value; intrinsic value is the profit that is built into the option already. So for instance if you have bought a $50 put option (bearish view) and the stock is trading at $40, that option already has $10 worth of value. So the instrinsic value of that is $10.
2) We have the extrinsic value. Extrinsic value (also known as time value or premium) is where the intricacies start. The premium consists of the time to expiry and implied volatility. As time increases so does the extrinsic value as the longer the time to expiry the larger the likelihood of bigger moves. Implied volatility is how volatile people perceive the stock price to be in the future.
What are the options for time-value decay, and how can a trader benefit from it?
The price of an option is the intrinsic value plus time value. For example a 95 call with the asset at 100 and a call price of $6.50 - (5.00 intrinsic) = $1.50 time value. On expiration day, with no time left. The time value will be zero.
But the time value will not decay in linear fashion, there is slope. Most often you will find time decay (theta) will increase rapidly after 18–22 days to expiration.
How does volatility work for an option buyer? Volatility (in annualized percentage form) is one of the variables for the black-schole option price ‘model’. It is used to price options to get an estimate of probability of a range of outcomes at expiration. Volatility measure the magnitude of price changes. Without regard for direction.
Once an option trades and is active and price is put into the BSM model and the Implied volatility is calculated. Implied volatility its the markets expectations of the magnitude of price changes in the future.
How is implied volatility different from historical volatility?
Historical volatility is the standard deviation of price returns of the underlying asset (on which the option is based) has traded IN THE PAST. The number is expressed as an annual percentage number.
Historical volatility tells us about the past. it is the annulled standard deviation of stock returns through the last sale or closing price.
Implied volatility is the volatility (same as historical - standard deviation per annum) is the volatility implied by the price of the option. It is the market's expectation of the volatility of the underlying asset from “today” until the expiration date of the option.
So historical tell us about the past, implied tells us about the future.
Complete Options Trading Course
Check the rest of the videos on our Options Trading videos playlist at
https://www.youtube.com/watch?v=43bk2a6CPr8&list=PLnSelbHUB6GQJHlFjss97-zlhYi_ndq9K

Views: 875
UKspreadbetting

@ Members :: This Video would let you know about parameters of Black Scholes Options Pricing Model (BSOPM) like Stock Price , Strike Price , Time to Maturity , Volatility ( Implied Volatility ) and Risk Free Interest Rates.
You are most welcome to connect with us at 91-9899242978 (Handheld) , Skype ~Rahul5327 , Twitter @ Rahulmagan8 , [email protected] , [email protected] or visit our website - www.treasuryconsulting.in

Views: 14145
Foreign Exchange Maverick Thinkers

The Options Pricing 101 course is designed to familiarize traders with the variables in options pricing models.

Views: 20405
Interactive Brokers

This video is a part of our course on Certification in Applied Derivatives (https://finshiksha.com/courses/certification-in-applied-derivatives/), and talks about the Binomial Model of Option Pricing.

Views: 502
FinShiksha

We apply portfolio replication approach to price an option in a one period binomial tree model. The methodology can be easily extended to multi-period binomial tree model. This is an application of the general methodology learnt in tutorial on binomial option pricing using portfolio replication.

Views: 64103
finCampus Lecture Hall

In this video Binomial Option Pricing Model is discussed.
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Please like, share, and comment.

Views: 183
SG Commerce Classes

In this tutorial Tom Starke from AAAQuants shows how to run a Monte-Carlo option pricing calculation with just two lines of Python and explains how this is done. Unlike Black-Scholes, where return distributions are assumed to be normal, in a Monte-Carlo model any return distribution can be used.
Check out more interesting quant topics at http://www.aaaquants.com

Views: 7925
scienceofsmile

Binomial Option Pricing Model (BOPM) single-period Leveraged and Probability methods for Call options.

Views: 314
Professor Drou

We make use of risk neutral valuation approach to price a european barrier call option. Along with enhancing the understanding of pricing barrier options, the idea of the video is to help develop a broader understanding of pricing options in discrete time framework with different payoffs.

Views: 29180
finCampus Lecture Hall

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This is the sixth video in our series on pricing options, to watch the whole series as a playlist, click here: https://www.youtube.com/watch?v=LHaftRA2N8A&list=PLHC72UlhAthDq-s_jRepKDrsaeGDU3PaJ
Options on Dividend Paying Underlyings
For an American-style call option, early exercise can make sense whenever the benefits of being long the underlying outweighs the cost of giving up the option early (the benefits of being long the underlying outweigh the foregone time value of the option). For example, on the day before an ex-dividend date, it may make sense to exercise an equity call option early in order to collect the dividend. In general, equity call options should only be exercised early on the day before an ex-dividend date, and then only for deep in-the-money options when the dividend is sufficiently large.
Todays video illustrates a scenario where a dividend of $2.50 per share is expected to be paid immediately prior to expiration of an option. Call option holders, though holding "bullish" or "long" positions with respect to the underlying asset, are not eligible to collect dividends paid on the underlyings. Therefore, if a long American call option holder expects at T0 and at T1 that a dividend will be paid on the underlying stock just prior to the option's maturity at T2, they can evaluate whether or not it is optimal to early-exercise. Analyzing potential early exercise at T0 shows there is no benefit to early exercising since the option is not in-the-money. At T1, the up node is in-the-money, the American call holder evaluates if holding or early-exercising is optimal. Early-exercising has a value at T1 in the up node of $3.00 ($30 share price less $30 strike). Using the European options binomial tree pricing formula fu in the up node, the call option is valued at only $2.73. This valuation difference came about because the expected value of the spot at T2 is reduced by $2.50 just prior to expiration. This dividend payment is of sufficient size, in this case (it is not always optimal to early-exercise on dividend-paying stocks, prior to expiration, it depends on the relative size of the dividend), that the underlying asset's price drop due to the dividend payment makes early-exercise the optimal strategy.

Views: 348
Patrick Boyle

Jacob Perlman breaks down the differences between the Black-Scholes model and the Heston model while simultaneously breaking Tom's spirit.
Watch more great programming only on the tastytrade network.
Live Monday-Friday 7am-3pm CT
https://www.tastytrade.com/tt/live

Views: 3111
tastytrade

Two weeks ago I had to implement this model, and I decided to share it with you.
Music:
©Setuniman
https://freesound.org/s/414279/

Views: 2133
ComputationalScientist

Series playlist: http://www.youtube.com/playlist?list=PLG59E6Un18vhANdpTHZCFnfj-jwFEqZ0Q&feature=view_all
In this tutorial, I introduce the Binomial Option Pricing Model. The simplest version of this is the one-period model, in which we consider a single time-step before option expiry. The ingredients of this pricing method are models for the behaviour of the stock and a riskless bond over the time-step. The bond earns interest at the risk-free rate, while the stock is assumed to move either up or down by fixed factors. Given an option, I show how to build a replicating portfolio from the bond and stock. The portfolio matches the option values at expiry. By no-arbitrage, today's value of the option must be simply today's value of the portfolio. Finally, I demonstrate that the theoretical option value may be written as a discounted expected future value, provided that we move to the risk-neutral measure, in which the risk-neutral probability q replaces our real-world probability p. [The tutorial is aimed at beginner to intermediate level.]

Views: 29658
Burbs Tutorials

A walkthrough of the Black Scholes Option Pricing Model on a Spreadsheet. Spreadsheet file is linked and available in Google Docs. Link for video is tinyurl.com/Bracker-BSOPMSpread

Views: 37436
Kevin Bracker

ZACH DE GREGORIO, CPA
www.WolvesAndFinance.com
This video discusses the Black-Scholes Option Pricing Model. This math formula was first published in 1973 by Fischer Black and Myron Scholes. They received the Nobel Prize in 1997 for their work. This equation calculates out the value of the right to enter into a transaction. The math is complicated, but the concept is simple. It is based on the idea that the higher the risk, the higher the return. So the value of an option is based on the riskiness of the payout. If a payout is uncertain, you would be willing to pay less money. The way the Black-Scholes equation works is with five main variables: volatility, time, current price, exercise price, and risk free rate. Each variable has some level of risk associated with it which drives the value of the option. By entering in your assumptions, it calculates a value. Calculators are available online for this equation. This video shows an example with actual numbers. You can understand the variable sensitivity by creating a table. You can change the value of the current price while keeping the other variables the same.
Neither Zach De Gregorio or Wolves and Finance Inc. shall be liable for any damages related to information in this video. It is recommended you contact a CPA in your area for business advice.

Views: 2250
WolvesAndFinance

How to Calculate the Price of a Call Option, the price of a Put Option and Put-Call Parity.
Here's the excel file if you wish to download it:
https://www.dropbox.com/s/a5jcbzy0u5dcvem/2010%20BSOPM%20Update.xlsx?dl=0

Views: 7130
Frank Conway

A continuation of the Black-Scholes Option Pricing Model with the focus on the put option.
Templates available at:
tinyurl.com/Bracker-StNormTable
tinyurl.com/Bracker-BSOPM
tinyurl.com/Bracker-BSOPMSpread

Views: 33134
Kevin Bracker

Training on Binomial Option Pricing Model Vamsidhar Ambatipudi

Views: 602
Vamsidhar Ambatipudi

[my xls is here https://trtl.bz/2AruFiH] The binomial option pricing model needs: 1. A set of assumptions similar but not identical to those found in Black-Scholes; 2. A framework; i.e., risk-neutral valuation which allows us to infer the probability of an up-jump; 3. An assumption about asset dynamics, in this case that arithmetic returns are normally distributed; and 4. A valuation process which is two steps: FORWARD simulation produces terminal asset prices, then BACKWARD induction which returns the option price based on a series of discounted expected values. Discuss this video here in our FRM forum: https://trtl.bz/30qCfFL.

Views: 1453
Bionic Turtle

www.investmentlens.com
We describe the risk neutral valuation approach to price an option using a one period binomial tree model. The approach can be easily extended to price derivatives using multi-period binomial treel.

Views: 26016
finCampus Lecture Hall

Quantitative Finance Bootcamp: http://bit.ly/quantitative-finance-python
Find more: www.globalsoftwaresupport.com

Views: 3835
Balazs Holczer

Training on Black Scholes Option Pricing Model for CT 8 Financial Economics by Vamsidhar Ambatipudi

Views: 1675
Vamsidhar Ambatipudi

How do you price options? How does binomial option pricing work? This video covers binomial option pricing, and provides simple examples of pricing a call and a put.
#Options #Derivatives #Binomial
*See my Book on Corporate Valuation at Amazon [Australia] https://amzn.to/2qS5wZs and [US] https://amzn.to/2FjicT7

Views: 228
Income and Capital

Buy The Book Here: https://amzn.to/2CLG5y2
Follow Patrick on Twitter Here: https://twitter.com/PatrickEBoyle
This is the fifth video in our series on pricing options. The whole series is collected as a playlist here: https://www.youtube.com/watch?v=LHaftRA2N8A&list=PLHC72UlhAthDq-s_jRepKDrsaeGDU3PaJ
If you are new to options pricing and binomial trees it might make sense to watch some of the other videos first.
Binomial Trees and American Options
American options can be exercised anytime up to maturity, as opposed to European options which can only be exercised at maturity. Binomial trees can be used to price American options with the only modification needed is to evaluate at each node as to whether there is more value associated with exercising or holding the option to expiration. The highest of these two values is used in calculating the option value.
In the two-step American binomial tree valuation shown in this video, we are using the same example as in our last video but with the option now American. In this case, at T1 it would be optimal to early-exercise. Thus the valuation at the first down node is in fact the early-exercise valuation, which is the intrinsic value at that node, as opposed to the valuation achieved from the risk-neutral valuation for fd. At time zero, the valuation of the derivative is based on fu as usual, but the fd value input into the formula for f is the early exercise cash flow.
To watch the video where we priced the same put option, but as a European option, click here. https://www.youtube.com/watch?v=nN4tOYVqf9o
Pricing American Options using the Binomial Tree Method
multi step binomial trees

Views: 286
Patrick Boyle

www.investmentlens.com
We describe the portfolio replication approach to price an option using a one period binomial tree model. The approach can be easily extended to price derivatives in multi-period setting.

Views: 20922
finCampus Lecture Hall

www.investmentlens.com
We describe the delta hedging approach to price an option using a one period binomial tree model. The approach can be easily extended to price derivatives in multi-period setting.

Views: 15279
finCampus Lecture Hall

This video shows how to calculate call and put option prices on excel, based on Black-Scholes Model.

Views: 10588
Mehmet Akgun

New York Institute of Finance instructor Anton Theunissen explains the history, mechanics, and application of the Black-Scholes Model of options pricing. Visit https://www.nyif.com/ to browse career advancing finance courses.

Views: 9224
New York Institute of Finance

www.investmentlens.com
We price an american binary call option in a 3 period binomial tree model. Idea is to show how an option with a particular payoff can be priced in discrete time framework. While not a prerequisite, watching tutorial on risk neutral valuation would be helpful as we show how we derive the risk neutral probability of asset pricing going up in each period.

Views: 9233
finCampus Lecture Hall

A difficult idea, but maybe the key idea in option pricing: we can price the option under the riskless assumption and yet it will be valid it the real (risky) world! For more financial risk videos, visit our website! http://www.bionicturtle.com

Views: 41048
Bionic Turtle

Share options and option pricing (part 1) - ACCA (AFM) lectures
Free ACCA lectures for the Advanced Financial Management (AFM) Exam
Please go to OpenTuition to download the AFM notes used in this lecture, view all remaining Advanced Financial Management (AFM) lectures, and post questions on the Ask the ACCA AFM Tutor Forums - We do NOT provide support on the youtube comments section.
*** Complete list of free ACCA lectures is available on https://opentuition.com/acca/afm/ ***

Views: 4998
OpenTuition

Binomial Option Pricing Part 2 http://www.youtube.com/edit?ns=1&video_id=_8aGHBBYrik&feature=vm
Black Scholes Part 1 http://www.youtube.com/watch?v=oITrJn6ndRg
Black Scholes Part 2 http://www.youtube.com/watch?v=E7rSQNJEYZA
More videos at http://facpub.stjohns.edu/~moyr/videoonyoutube.htm

Views: 20287
Ronald Moy

I didn't have time to cover this question in the exam review on Friday so here it is.

Views: 17347
Julian Aziz

Buy The Book Here: https://amzn.to/2CLG5y2
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The ideas we developed for a single-period binomial model also apply to a multi-period approach. In this video we will look at a two-step, or two time-period binomial tree. In this framework the stock price must follow one of four patterns. For the two periods, the stock can go up-up, up-down, down-up, or down-down. At the moment, we are assuming fixed down and up percentages, the down-up and up-down paths will end with the same final stock price (but you will later see that this restriction is not required, the valuation approach is more flexible than this).
Binomial trees can be used for valuing puts or calls. Consider a two step binomial tree, with each step one year long where at each node the stock moves up or down 20% and the risk-free rate is 5%. Suppose the stock price is now $20 and that we will try to value a put with a strike of $20.
You work from right to left, backward in time, valuing the option node by node, first calculating fu and fd using the above formulas, then value f using the formula.
Now that we have looked at a two-period binomial tree, you can easily see that we can, using the same formulas, produce binomial trees with as many nodes as we want. The more periods that we add, the more realistic our model becomes. A binomial tree with just 20 periods gives more than a million stock price movement patterns.
Clearly working out a series of one-second node one-penny price movement binomial trees would take quite a while, but it is easy to code the approach on your computer, and it is virtually unlimited as to how many nodes you can add. The binomial model assumes that movements in the price follow a binomial distribution. If you increase the number of nodes, and are modeling the stock price evolution over a very short period of time, you begin to approach a very realistic share price trajectory. Each node could be one second in duration, and show the stock’s expected price moves of, as an example, up one penny or down one penny. This begins to approximate real-life stock price movements quite accurately.
At each second during a trading day, it is fairly realistic to assume that a $20 stock will increase or decrease by as little as $0.01 or $0.02. As you increase the number of nodes, this binomial distribution approaches the lognormal distribution assumed by Black–Scholes (see that video).
When analyzed as a numerical procedure, the Cox, Ross, and Rubinstein binomial method can be viewed as a special case of the explicit finite difference method for the Black-Scholes partial differential equation.
The binomial tree approach is very flexible, and can take into account dividends, early exercise opportunities, and even different distributions of stock price movements over the time to maturity of the derivative being valued. This means that you could model low volatility periods of stock price movements, and then higher volatility periods for the stock—perhaps around their earnings announcements—over the duration of an option’s life.
Although computationally slower than the Black–Scholes formula, it is more accurate, particularly for longer-dated options on securities with dividend payments. For these reasons, various versions of the binomial model are widely used by practitioners in the options markets. For options with several sources of uncertainty and for options with complicated features, binomial methods can be less practical due to several difficulties, at which point Monte Carlo option models are used instead.

Views: 321
Patrick Boyle

© 2019 Exchange outlook 2018 certificate error

Current Dividend Preference. Participating Preferred Stock. Convertible Preferred Stock. Cumulative preferred stock includes a provision that requires the company to pay preferred shareholders all dividends, including those that were omitted in the past, before the common shareholders are able to receive their dividend payments. Non-cumulative preferred stock does not issue any omitted or unpaid dividends. If the company chooses not to pay dividends in any given year, the shareholders of the non-cumulative preferred stock have no right or power to claim such forgone dividends at any time in the future. Participating preferred stock provides its shareholders with the right to be paid dividends in an amount equal to the generally specified rate of preferred dividends, plus an additional dividend based on a predetermined condition. This additional dividend is typically designed to be paid out only if the amount of dividends received by common shareholders is greater than a predetermined per-share amount. If the company is liquidated, participating preferred shareholders may also have the right to be paid back the purchasing price of the stock as well as a pro-rata share of remaining proceeds received by common shareholders. Significance to Investors. Shareholder. Preferred Stock.