Concept
Rational pricing
Concepts associés (24)
Bond option
In finance, a bond option is an option to buy or sell a bond at a certain price on or before the option expiry date. These instruments are typically traded OTC. A European bond option is an option to buy or sell a bond at a certain date in future for a predetermined price. An American bond option is an option to buy or sell a bond on or before a certain date in future for a predetermined price. Generally, one buys a call option on the bond if one believes that interest rates will fall, causing an increase in bond prices.
Bootstrapping (finance)
In finance, bootstrapping is a method for constructing a (zero-coupon) fixed-income yield curve from the prices of a set of coupon-bearing products, e.g. bonds and swaps. A bootstrapped curve, correspondingly, is one where the prices of the instruments used as an input to the curve, will be an exact output, when these same instruments are valued using this curve. Here, the term structure of spot returns is recovered from the bond yields by solving for them recursively, by forward substitution: this iterative process is called the bootstrap method.
Option time value
In finance, the time value (TV) (extrinsic or instrumental value) of an option is the premium a rational investor would pay over its current exercise value (intrinsic value), based on the probability it will increase in value before expiry. For an American option this value is always greater than zero in a fair market, thus an option is always worth more than its current exercise value. As an option can be thought of as 'price insurance' (e.g.
Strike (finance)
vignette|Gains et bénéfices d'une option d'achat Le strike désigne le prix d'exercice d'une option, qui correspond au prix fixé dans le contrat pour l’acquisition ou la cession du sous-jacent. La position du cours du sous-jacent par rapport au strike permet de caractériser l’option. Une option d’achat (respectivement de vente) est dite : « à la monnaie » si le sous-jacent cote le strike (ATM) ; « hors de la monnaie » si le cours du sous-jacent est inférieur (respectivement supérieur) au strike (OTM) ; « dans la monnaie » si le cours du sous-jacent est supérieur (respectivement inférieur) au strike (ITM).