Stock Share i s

Forward General concept

poire
poising option
Application toexample
Tophodel

Stock limit
Et Soyo Black Scholes
î
today'sprie

Forward contract
obligation to buy sell 1 stock at a pre defined
price at a
future
date TO

agreement

Moi
Ift Soit price
at the forwardcontrat
Soit
fwwdpr.ie ofSt
Noarbitrageopportunity
Claim S So élit xT
free lunch
t
why
if Soi So erat
to Sell stock 5
invest So at Rfi
Buy Fwd
 Et Soe So Do
So erat
if So

to Sell fud ET pay

back

Borrow So Soeklot T

Buy Stock Soit 70

forward
price Soit future prise that the market expects
based today's
info filtration
MA

St stock
prise at time T Son EI si
St Random variable

Options callPur Right to buy resp sell one stock at a predefined

price Strike at a future

date

ifpo
if Si K Nothing
toi
pff Boystoch K
prenium
K ifs p
Sell stock si
boytheright
exceed
 exe d

inthemarket
ftp.e

On average p needs to offset thearbitrage

payoff f if sick
K
St
Kif f

average payoff E payoff SD

p être E payoff si

general underlying

Variance
swaps E ln sis

Payoff of a Call max St Kio

é ht E max St Kio
pe
Pot K St o
p é E max
 Binomial Model

il To compute p we need to know

Is
À Ipdud
the distribution of St
g.jo Outcomes

I
Pd
Isop X
L'proba t Et
price of a call option Ay KSol

Answer as a fonction ofpu Pd

Pu Pd why

Distribution
of the payoff

paéluSolu 1
Solu 1 0
Po pa

Calloption
F So atten

ft
payoff Solu 1
Payoff Sol air
a
0 pd
prenium payoff
if re

Hr solo n fer
 pr l

pu pd 1 flair Els forward

pufoutpdfod
pd 1 pu

Gtr pu v
f pu d

pu 1ft
pd 1 pu
pde u d Earl I
u d

Pd
II asp peutral Measure
A
Then
for any payoff 1h15 prenium E Chest
É
European

Application So 90 re 3
SE 75,1104

price
of a Call Strike S
ht s
call strike 95
 Pu 1.03 7510
1 751g

1 1 9.9
prenium
Èox
payoff KS
So Sod
prenium pdx
In
90 11 F x 0.49
70
71

IQ kh Lk st
Si
Call K T Puttkit Élst
à

Call KT Putch T S
En frity
9.9 7.1
90
2.82ff G shouldbeegal
2.6 call
9 payoff

Et
1 J
 K I
galipot
So u

Call155,1
ftp.lsou k
s
ÎÎ
Sod
Is no 59 90 1 95

743

Binary Option
S 100
if
200
youget
110 pu
if Sa
o
h s
f
200
f51 75 Pd

si Cooxpd x
prenium
Eth 9 95

Hs
Notation
Hyo
200

indicator

200
hls Asano
S 2100 x 200
 the wish
unite proba measureunder
Call
If s _µ So
a
sa
Poand pd

t end
u î
Vol M
all Lall ki T
KT Rp So u R

MS _ET
Itou solputsods.pt

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Tansi teks
So This
far binary option
Same Question

Ta i
A H
Binomial Model
a Sou
SI y

i son

sod
o l
d Sod

n
nï

et

dictoff

pu.pt

Distofsa
Price
Sa ofcall I 2 Kon

lookback option payoff 100

if G 100
s t
 Il t s 100 paidat F2

Pu
YI E 4
a
T.EE i4 Si
F1 10F 7f HÉ
sou
Pue
good sode
2hPa Pd
ftp.futfdpd
1h6 HÊ

Elsi Solipitrodpupd d'p

SoloriII
Reminder

A Sol Solu 1
h d

Reminder X n n

Kf41 piflit piffer t

 Kf41 prflatypifla
Var 5 si Elsi

Efsa So Sesot Souid Sod

S lui pitlud 1 pupdt d 1 pdr

fÉsat
8151 15.6
Sou
v
Sg

j'ÏÉÉj sionalperiodeil
fautdiviseuparer
d Sod
SoitSou v2
Call 2,100 52 100 1 payoff Good ud
Sod d
52,1 5.3 4,0

5.24
LB
Iggy affectait
xpupd

5,3100 4 100

putpupd