Option (finance) | EPFL Graph Search

Are you an EPFL student looking for a semester project?

Work with us on data science and visualisation projects, and deploy your project as an app on top of GraphSearch.

In finance, an option is a contract which conveys to its owner, the holder, the right, but not the obligation, to buy or sell a specific quantity of an underlying asset or instrument at a specified strike price on or before a specified date, depending on the style of the option. Options are typically acquired by purchase, as a form of compensation, or as part of a complex financial transaction. Thus, they are also a form of asset and have a valuation that may depend on a complex relationship between underlying asset price, time until expiration, market volatility, the risk-free rate of interest, and the strike price of the option. Options may be traded between private parties in over-the-counter (OTC) transactions, or they may be exchange-traded in live, public markets in the form of standardized contracts. An option is a contract that allows the holder the right to buy or sell an underlying asset or financial instrument at a specified strike price on or before a specified date, depending on the form of the option. Selling or exercising an option before expiry typically requires a buyer to pick the contract up at the agreed upon price. The strike price may be set by reference to the spot price (market price) of the underlying security or commodity on the day an option is issued, or it may be fixed at a discount or at a premium. The issuer has the corresponding obligation to fulfill the transaction (to sell or buy) if the holder "exercises" the option. An option that conveys to the holder the right to buy at a specified price is referred to as a call, while one that conveys the right to sell at a specified price is known as a put. The issuer may grant an option to a buyer as part of another transaction (such as a share issue or as part of an employee incentive scheme), or the buyer may pay a premium to the issuer for the option. A call option would normally be exercised only when the strike price is below the market value of the underlying asset, while a put option would normally be exercised only when the strike price is above the market value.

About this result

This page is automatically generated and may contain information that is not correct, complete, up-to-date, or relevant to your search query. The same applies to every other page on this website. Please make sure to verify the information with EPFL's official sources.

Related publications (8)

Related people (1)

Related concepts (99)

Related courses (83)

Related lectures (466)

Related MOOCs (9)

Illiquidity and Higher Cumulants

Semyon Malamud, Alberto Mokak Teguia

We characterize the unique equilibrium in an economy populated by strategic CARA investors who trade multiple risky assets with arbitrarily distributed payoffs. We use our explicit solution to study t

OXFORD UNIV PRESS INC2022

Options are some of the most traded financial instruments and computing their price is a central task in financial mathematics and in practice. Consequently, the development of numerical algorithms fo

EPFL2019

Equilibrium Models for Derivatives Markets with Frictions

Yuan Zhang

This thesis develops equilibrium models, and studies the effects of market frictions on risk-sharing, derivatives pricing, and trading patterns. In the chapter titled "Imbalance-Based Option Pricing"

EPFL2018

Put option

In finance, a put or put option is a derivative instrument in financial markets that gives the holder (i.e. the purchaser of the put option) the right to sell an asset (the underlying), at a specified price (the strike), by (or on) a specified date (the expiry or maturity) to the writer (i.e. seller) of the put. The purchase of a put option is interpreted as a negative sentiment about the future value of the underlying stock. The term "put" comes from the fact that the owner has the right to "put up for sale" the stock or index.

Credit default option

In finance, a default option, credit default swaption or credit default option is an option to buy protection (payer option) or sell protection (receiver option) as a credit default swap on a specific reference credit with a specific maturity. The option is usually European, exercisable only at one date in the future at a specific strike price defined as a coupon on the credit default swap. Credit default options on single credits are extinguished upon default without any cashflows, other than the upfront premium paid by the buyer of the option.

Asian option

An Asian option (or average value option) is a special type of option contract. For Asian options, the payoff is determined by the average underlying price over some pre-set period of time. This is different from the case of the usual European option and American option, where the payoff of the option contract depends on the price of the underlying instrument at exercise; Asian options are thus one of the basic forms of exotic options.

FIN-404: Derivatives

The objective of this course is to provide a detailed coverage of the standard models for the valuation and hedging of derivatives products such as European options, American options, forward contract

FIN-503: Advanced derivatives

The course covers a wide range of advanced topics in derivatives pricing

FIN-522: Venture capital

The course applies finance tools and concepts to the world of venture capital and financing of projects in high-growth industries. Students are introduced to all institutional aspects of the venture c

Organisé en deux parties, ce cours présente les bases théoriques et pratiques des systèmes d’information géographique, ne nécessitant pas de connaissances préalables en informatique. En suivant cette

Learn how to apply the Market Opportunity Navigator - a three-step tool for identifying, evaluating and strategizing market opportunities - to get the most value for your innovation.

Gas Refrigeration Systems ME-251: Thermodynamics and energetics I

Explores gas refrigeration systems, including Brayton cycles and heat pumps, discussing principles, performance, and optimization approaches.

The Black-Scholes-Merton Model FIN-404: Derivatives

Covers the Black-Scholes-Merton model, dynamics, self-financing strategies, and the PDE.

Blender interactive demo: building a castle CS-341: Introduction to computer graphics

Showcases an interactive Blender demonstration focusing on building a castle through modeling, sculpting, and editing a cone mesh.