Ch13HullFundamentals5thEd

# Ch13HullFundamentals5thEd - Fundamentals of Futures and...

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Unformatted text preview: Fundamentals of Futures and Options Markets , 5 th Edition, Copyright © John C. Hull 2004 13.1 Options on Stock Indices and Currencies Chapter 13 Fundamentals of Futures and Options Markets, 5th Edition, 13.2 European Options on Stocks Paying Dividend Yields We get the same probability distribution for the stock price at time T in each of the following cases: 1. The stock starts at price S and provides a dividend yield = q 2. The stock starts at price S e – q T and provides no income Fundamentals of Futures and Options Markets, 5th Edition, 13.3 European Options on Stocks Paying Dividend Yield continued We can value European options by reducing the stock price to S e – q T and then behaving as though there is no dividend Fundamentals of Futures and Options Markets, 5th Edition, 13.4 Extension of Chapter 8 Results (Equations 13.1 to 13.3) rT qT Ke e S c--- ≥ Lower Bound for calls: Lower Bound for puts qT rT e S Ke p--- ≥ Put Call Parity qT rT e S p Ke c-- + = + Fundamentals of Futures and Options Markets, 5th Edition, 13.5 Extension of Chapter 12 Results (Equations 13.4 and 13.5) T T q r K S d T T q r K S d d N e S d N Ke p d N Ke d N e S c qT rT rT qT σ σ-- + = σ σ +- + =--- =- =---- ) 2 / 2 ( ) / ln( ) 2 / 2 ( ) / ln( ) ( ) ( ) ( ) ( 2 1 1 2 2 1 where Fundamentals of Futures and Options Markets, 5th Edition, 13.6 The Binomial Model S u ƒ u S d ƒ d S ƒ p ( 1 – p ) F = e-rT [ pf u + ( 1 – p ) f d ] Fundamentals of Futures and Options Markets, 5th Edition, 13.7 The Binomial Model continued In a risk-neutral world the stock price...
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## This note was uploaded on 10/07/2011 for the course FIN 416 taught by Professor Sankarshanacharya during the Fall '11 term at Ill. Chicago.

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Ch13HullFundamentals5thEd - Fundamentals of Futures and...

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