MATBUS470 Lecture Notes - Lecture 6: Strike Price, Call Option, Arbitrage
Document Summary
Chapter 10 mechanics of options markets: read for fun. American call can only be exercised at the end of its life can be exercised at any time before maturity. Max (st - k, 0) = min ( k - st, 0) Stock option (s) are popular (most of them are exchange traded, based on 100 shares) Foreign currency - most are over the counter market (otc) Speci cations of exchange traded options only the writer need to put up the margin (required to write options) Warrants options that are issued by the corporation or a nancial institution, long term options, often attached to bonds. Can be exchanged for equity at certain times in the future. Usually a convertible is callable , a provision to force early conversion. Expiration date ( saturday, following the 3rd friday of the month) (4 month cycle)