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The formula is quickly proven by reducing the situation to one where we can apply the Black-Scholes formula. First, consider both assets as priced in units of S 2 (this is called 'using S 2 as numeraire'); this means that a unit of the first asset now is worth S 1 /S 2 units of the second asset, and a unit of the second asset is worth 1.
The Bull Put Credit Spread (see bull spread) is a bullish strategy and consists of selling a put option and purchasing a put option for the same stock or index at differing strike prices for the same expiration. The purchased put option is entered at a strike price lower than the strike price of the sold put option.
Brian K. Boonstra: Model For Pricing ESOs (Excel spreadsheet and VBA code) Joseph A. D’Urso: Valuing Employee Stock Options (Excel spreadsheet) Thomas Ho: Employee Stock Option Model Archived 2016-03-04 at the Wayback Machine (Excel spreadsheet) John Hull: software based on the article: How to Value Employee Stock Options (Excel spreadsheet)
Moderately bearish' options traders usually set a target price for the expected decline and utilize bear spreads to reduce cost. While maximum profit is capped for these strategies, they usually cost less to employ. The bear call spread and the bear put spread are common examples of moderately bearish strategies.
For example, if a risk-free 10-year Treasury note is currently yielding 5% while junk bonds with the same duration are averaging 7%, then the spread between Treasuries and junk bonds is 2%. If that spread widens to 4% (increasing the junk bond yield to 9%), then the market is forecasting a greater risk of default, probably because of weaker ...
For an MBS, the word "option" in option-adjusted spread relates primarily to the right of property owners, whose mortgages back the security, to prepay the mortgage amount. Since mortgage borrowers will tend to exercise this right when it is favourable for them and unfavourable for the bond-holder, buying an MBS implicitly involves selling an ...
Scott Pianowski aims to help you get ready for the biggest fantasy draft weekend of the year with some tried-and-true advice. Fantasy Football Draft: Cheat sheet for last-second strategy tips for ...
The "straight" ratio-spread describes this strategy if the trader buys and writes (sells) options having the same expiration. If, instead, the trader executes this strategy by buying options having expiration in one month but writing (selling) options having expiration in a different month, this is known as a ratio-diagonal trade.