Lecture 11 Flashcards
1
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Multi-Period Binomial Model
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2
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Risk-neutral probability:
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3
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Two-period binomial example
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4
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5
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value of the call at t = 0
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6
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Replication method
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7
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Theorem on Early Exercise of an American Call
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It is never optimal to exercise early an American call on a
non-dividend paying stock.
8
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Theorem on Early Exercise of an American Put
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the price of an American put on a non-dividend paying stock
may be greater than the price of the corresponding European put. It may be optimal to exercise early an American put on
non-dividend paying stock.
9
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Black-Scholes price for a call:
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10
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Properties of the Black-Scholes Prices
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11
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Practical Implementation of Black-Scholes Model
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12
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Historical Volatility - steps to calculate
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13
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Implied volatility
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14
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15
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16
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17
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18
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19
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20
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21
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22
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23
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24
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25
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26
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27
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28
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29
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30
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31
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32
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33
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34
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35
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36
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37
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38
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39
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40
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41
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42
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43
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44
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45
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46
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47
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48
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49
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50
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51
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52
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53
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54
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55
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