A graphical note on European put thetas

Article Abstract:

A graphical analysis of the comparative statistics of European puts with regards to its time to expiration is conducted to determine when it is positive or negative and to understand how it changes over time. It was found that the put price function converges to its intrinsic value function in a clockwise pivoting motion, where the pivot point moves as the time to expiration approaches. The pivot point matches the stock price where the put's theta is zero. The put will decrease in price over time if the stock price is higher, but will increase in price if the stock price is lower.

Usage, Prices and rates, Stocks, Stock prices, Graphic methods

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Time-dependent barrier option values

Article Abstract:

Time-dependent barrier options prove to be effective when it comes to hedging and investment in the foreign exchange over-the-counter (OTC) market. They are hybrids of regular barrier options and ordinary options that are flexible since they allow investors to determine a barrier period covering a specific time of the option life, either at the beginning (front end) or at the end (rear end). Time-dependent barrier options also allow investors to increase the variety of risk of option being knock-out or during the option life.

Futures

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Simple risk measures when hedging commodities using foreign markets: a note

Article Abstract:

A simplified technique for measuring the short run total price risk reduction that may occur when using commodity futures markets in foreign countries is presented. The method decomposes short run price risk into futures price risk, basis risk and currency risk through 'perfect' forecasts. Information from such decomposition can be used in determining the effects of various risk sources and formulating management strategies.

Management, Measurement, Risk (Economics), Commodity futures

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