Chap015 - Chapter 15 Option Valuation Slides 15-1 15-2 15-3...

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Chapter 15 Option Valuation Slides 15-1 Fundamentals of Investments 15-2 Option Valuation 15-3 Just What is an Option Worth? 15-4 The Black-Scholes-Merton Option Pricing Model 15-5 The Black-Scholes-Merton Option Pricing Model 15-6 The Black-Scholes-Merton Option Pricing Formula 15-7 Formula Details 15-8 Example: Computing Prices for Call and Put Options 15-9 We Begin by Calculating d1 and d2 15-10 We Could Use a Table of Standard Normal Probabilities 15-11 Or, we could use the =NORMSDIST(x) function in Excel 15-12 The Call Price and the Put Price: 15-13 We can Verify Our Results Using a Version of Put-Call Parity 15-14 Valuing the Options Using Excel 15-15 Valuing Employee Stock Options 15-16 Example: Valuing Coca-Cola ESOs Using Excel 15-17 Summary: Coca-Cola Employee Stock Options 15-18 Varying the Option Price Input Values 15-19 Varying the Underlying Stock Price 15-20 Varying the Time Remaining Until Option Expiration 15-21 Varying the Volatility of the Stock Price 15-22 Varying the Interest Rate 15-23 Calculating the Impact of Input Changes 15-24 Calculating Delta 15-25 Example: Calculating Delta 15-26 The “Delta” Prediction: 15-27 Calculating Vega 15-28 Example: Calculating Vega 15-29 The “Vega” Prediction: 15-30 Other Impacts on Option Prices from Input Changes 15-31 Implied Standard Deviations 15-32 Implied Standard Deviations, Cont. 15-33 Example, Calculating an ISD 15-34 CBOE Implied Volatilities for Stock Indexes 15-35 15-36 VXN vs. Nasdaq 100 Index Realized Volatility 15-37 Hedging a Portfolio with Index Options
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A-136 Chapter 15 15-38 Example: Calculating the Number of Option Contracts Needed to Hedge an Equity Portfolio 15-39 Implied Volatility Skews 15-40 Implied Volatility Skews, Cont. 15-41 Graph of Volatility Skews 15-42 Implied Volatility Skews, Summary 15-43 Useful Websites 15-44 Chapter Review, I. 15-45 Chapter Review, II. Chapter Organization 15.1 The Black-Scholes-Merton Option Pricing Model 15.2 Valuing Employee Stock Options 15.3 Varying the Option Price Input Values A. Varying the Underlying Stock Price B. Varying the Option's Strike Price C. Varying the Time Remaining Until Option Expiration D. Varying the Volatility of the Stock Price E. Varying the Interest Rate F. Varying the Dividend Yield 15.4 Measuring the Impact of Input Changes on Option Prices A. Interpreting Option Deltas B. Interpreting Option Etas C. Interpreting Option Vegas D. Interpreting an Option's Gamma, Theta, and Rho 15.5 Implied Standard Deviations A. CBOE Implied Volatilities for Stock Indexes 15.6 Hedging a Stock Portfolio with Stock Index Options 15.7 Implied Volatility Skews 15.8 Summary and Conclusions Selected Web Sites www.jeresearch.com (for more information on option formulas) www.cboe.com (for a free option price calculator) www.numa.com (for options trading strategies and a lot more on options) www.ivolatility.com (for applications of implied volatility) www.aantix.com (for stock option reports)
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Option Valuation A-137 www.pmpublishing.com (for free daily volatility summaries)
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Chap015 - Chapter 15 Option Valuation Slides 15-1 15-2 15-3...

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