108156.pdf

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Index 309


martingale probability 63, 250
maturity date 39
minimum variance



  • line 109

  • portfolio 108
    money market 43, 235


no-arbitrage principle 7, 79, 88
normal distribution 70, 186


option



  • American 183

  • at the money 169

  • call 13, 147, 181, 188

  • European 173, 181

  • in the money 169

  • interest rate 254

  • intrinsic value 169

  • out of the money 169

  • payoff 173

  • put 18, 147, 181, 189

  • time value 170
    out of the money 169


par, bond trading at 42, 249
payoff 148, 173
periodic compounding 25
perpetuity 24, 30
portfolio 76, 87



  • admissible 5

  • attainable 107

  • delta neutral 192

  • delta-gamma neutral 198

  • delta-vega neutral 198

  • expected return 108

  • market 119

  • variance 108

  • vega neutral 197
    positive part 148
    predictable strategy 77, 88
    preferable compounding 36
    present value 24, 27
    principal 22
    put option 18, 181

  • American 147

  • European 147, 189
    put-call parity 150

  • estimates 153


random interest rates 237
random walk 67
rate



  • coupon 249

  • effective 36

    • forward 233

    • – initial 232

    • – instantaneous 233

    • of interest 22
      –ofreturn 1,49

    • spot 229
      regression line 120
      residual random variable 121
      residual variance 122
      return 1, 49
      –expected 53

    • including dividends 50

    • logarithmic 34, 52
      reversed butterfly 209
      rho 197
      risk 10, 91

    • diversifiable 122

    • market price of 212

    • systematic 122

    • undiversifiable 122
      risk premium 119, 123
      risk-neutral

    • expectation 60, 83
      –market 60

    • probability 60, 83, 250
      scenario 47
      security market line 123
      self-financing strategy 76, 88
      short forward position 11, 125
      short rate 235
      short selling 5, 74, 77, 87
      simple interest 22
      spot rate 229
      Standard and Poor Index 141
      state 238
      stochastic calculus 71, 185
      stochastic differential equation 71
      stock index 141
      stock price 47
      strategy 76, 87

    • admissible 79, 88

    • predictable 77, 88

    • self-financing 76, 88

    • value of 76, 87
      strike price 13, 147
      stripped bond 230
      swap 256
      swaption 258
      systematic risk 122




term structure 229
theta 197
time value of money 21
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