Search for over 100,000 study notes and past assignments!


Download study resources by swapping your own or buying Exchange Credits.


Study from your library anywhere, anytime.

Lecture 11 – The Greek Letters and Exotic Options
Page 1/6
Page 1/6

Lecture 11 – The Greek Letters and Exotic Options

FINC3012 - Derivative Securities

6 Pages Partial Study Notes Year: Pre-2018

Lecture 11 – The Greek Letters and Exotic Options 1. THE GREEK LETTERS: Example: • A bank has sold for $300,000 a European call option on 100,000 shares of a nondividend paying stock • S0 =49, K =50, r =5%, σ=20%, T = 20 weeks, μ = 13% • The Black-Scholes value of the option is $240,000 • How does the bank hedge its risk? Naked and Covered Positions: • Naked Position o Take no action • Covered Position o Buy 100,000 shares today • Both strategies leave the bank exposed to significant risk Stop-Loss Strategy: • This involves: o Buying 100,000 shares as soon as price reaches $50 o Selling 100,000 shares as soon as price falls below $50 
 • This deceptively simple hedging strategy does not work well Delta (Δ): • The rate of change of the option price with respect to the underlying

This document is 10 Exchange Credits

More about this document:

This document has been hand checked

Every document on Thinkswap has been meticulously hand checked to make sure it's correctly described and categorised. No wading through heaps of irrelevant content.

This is a Partial Set of Study Notes

Partial Study Notes typically cover only single topics of a unit of study or do not cover multiple topics in significant detail. They are generally less than 20 pages in length.

What are Exchange Credits?

Exchange Credits represent the worth of each document on Thinkswap. In exchange for uploading documents you will receive credits. These can then be used to checkout other documents on Thinkswap.

We aren't happy till you're happy

Each document purchased on Thinkswap is covered by our Satisfaction Guarantee policy. If the document is not of an acceptable quality or the document was incorrectly described or categorised, Thinkswap will provide a full refund of Exchange Credits so you can purchase another document. For more information please click here.

Students are required to always deal ethically with work on Thinkswap

Studying from past student work is an amazing way to learn and research, however you must always act with academic integrity.

This document is the prior work of another student and has been made available to plagiarism detection tools. Do not copy from this work. Understand how you can responsibly use this work by visiting ‘Using Thinkswap resources correctly’.

Claim a Bounty

Similar documents to "Lecture 11 – The Greek Letters and Exotic Options" avaliable on Thinkswap

Documents similar to "Lecture 11 – The Greek Letters and Exotic Options" are suggested based on similar topic fingerprints from a variety of other Thinkswap Subjects

Browse USYD Subjects


High School