A Quick Review Of Financial Options Pricing Methods The concept of option contracts: Option contract is a contract mosquitoes just right, entitles its owner to sell something specific, or buy it at a certain price over the (over) a certain period of (information) or on a specific date, either directly or through a guarantor rights body sides.
Or is the “contract is really the buyer (not the obligation) to buy or sell a certain something, a certain price (strike price) during a certain period of time, and you need saleswoman sell or buy that thing at the agreed price during that time period, for a fixed amount paid by the buyer decade, called the premium. “Known as the premium, which is the same as the price of the Orion Code APP option on it: “Agreed compensation paid to the seller (the seller of the option) by the buyer (defended the price of the option) for the enjoyment of the right to buy (if buying) or the right to sell the option (if the sale option) securities during a specified period of time. this amount is a reference both carried the buyer the right, or not implemented. ”
Options contracts began first in goods in 1630, and then expanded handled encompassing real estate and securities transactions in markets outside the stock exchange, where they were treated options contracts on stocks in the London market in the securities beginning of the year 1820, and during the year 1860 was set up options and securities in the American market and the contracts which is typical, where not a negotiability in the secondary market, and the real and evolving growth to deal with options launched by the industrial and technological progress between 1970 m and 1980 m, where the first organized market for the options in America appeared in the city of Chicago in 1973, where he established the board Chicago market specialist for the options, which are designed contracts typically enabled the circulation and handle them as financial instruments, and then spread to handle these standard contracts in other markets within the United States, reaching Orion Code System option contracts to more than one million contracts daily.
Handle these contracts form typical in other countries did not begin until the contract eighties of the twentieth century, in the year 1977 have been dealt with options standardized in the LSE, and has increased the number of markets that deal these contracts to more than 40 markets around the world, the options (choices) initially for commodities, especially agricultural crops, and then evolved into include most goods and stock, especially after the establishment of the Chicago market, and stereotyping of options contracts, and in the early eighties of the twentieth century has been the inclusion of new types of choices, including stocks, treasury bonds ( US and foreign), and goods and commodities, and indices and currencies …
One of the important concepts in the field of financial options theory (premium) which represents the price of any bonus option acquired by option editor, and stop usually the value of this premium on several factors such as: market value of the asset covered by the option, the exercise price and the date of implementation (accrual period and the longer it the price is higher), prevailing interest rates, supply and demand on the purchase and sale of option contracts and fluctuations the premium cost of the price of the right of option which is the market value of the option contract and is used to calculate a set of diagrams and mathematical models that will be the focus of a separate Study of this chapter.
It takes the exercise price (which is also called the exercise price) specified in the contract three possible cases of option. It can be either: Up, equal to or less than the current price (the market) to the original place of contracting.