call option pricing
Download
Skip this Video
Download Presentation
Call Option Pricing

Loading in 2 Seconds...

play fullscreen
1 / 15

Call Option Pricing - PowerPoint PPT Presentation


  • 149 Views
  • Uploaded on

Call Option Pricing. Using replicating portfolios. Call Options. Call Option, time T Payout Function. Call Option, Net Profit Function. Arbitrage: no riskless profits . Example: Possible stock price movements. Example: Possible call option payouts.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Call Option Pricing' - maili


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
call option pricing

Call Option Pricing

Using replicating portfolios

slide7
Example: Possible call option payouts

Clearly, if the stock price goes down at t = 1, the option will be worthless (no possible payout). So let’s start at the top-right node.

call value payouts
Call Value Payouts

Notice that probabilities do not appear in this pricing solution. Why not?

The probabilities are implicit in the current stock price (relative to probabilities and outcomes of future stock prices).

slide13
*** Notice this portfolio costs: – (5/7)(50) + 22.5 = -13.21, the same as the option price.

***

***

***At t = 1, borrow 22.5 more (to total 45) and buy 2/7 more shares (to total 1 share).

black scholes calculator online
Black-Scholes Calculator (online)

Free: http://www.tradingtoday.com/black-scholes

ad