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Today lets discuss about the greek called Gamma, Gamma is nothing but rate of change of delta w.r.t. the price of the underlying asset. Gamma is highest for the options that are close to At the money. As option price does not change linearly but non linearly w.r.t the underlying asset price the...

Now lets discuss theta, Theta is the rate of change of the derivative w.r.t. the passage of time. The theta of a call or a put is usually negative that is the value of the long option decreases with the passage of time with price and volatility of the underlying asset remaining the same. The...

As far I can explain i have done: consider a future contract with time t with exercise price K, value of contract for t=1, v1=S-K*e^-r value of contract for t=2, v2=e^r(S-K*e^-r) value of contract for t=3, v3=e^2r(S-K*e^-r) ...value of contract for t=T, vT=e^Tr(S-K*e^-r) so for t=T maturity the...

go to link frm: www.gocharter.com.tw/download/2011FRM_StudyGuide.pdf for 2011 AIM statemnts and www.gocharter.com.tw/download/2012FRM_StudyGuide.pdf for 2012 AIM statements. thanks

Hello all, I am starting a new thread for greeks. I shall discuss all the greeks in coming days. So lets start with the delta. Delta is the rate of change of option price with respect to the underlying asset. Delta hedging is maintaining delta neutral portfolio. delta=dC/dS so delta hedging...

Hi @Hend, regarding point 3 yeah sorry for the wrong wording I meant here to say that high inflation leads to high interest rates which can jeopardize the investment. I mean i didn't revised it after answering. I agree on this point. regarding point 2 printing more money always increases the...

Volatility Swaps is an agreement to exchange realized volatility between time 0 and T with a prespecified volatility set at time 0. Both volatility being multiplied with a pre-specified principal. Variance Swaps is an agreement to exchange realized variance between time 0 and T with a...

This is according to my understanding: Govt. can print money and use it for public expenditure. If govt. does not tax people than people now have full income with them and hence more money to spend. So if earlier they had 65to spend now they are left with 100 to spend. Govt. if want to spend say...

Asian Options determines payoffs based on the average stock price. Average stock price over a period T is compared with the stock price at expiration and payoff is determined based on whether the average stock price is greater or less than the stock price at expiration.Similarly for average...

Shout options: Buyer can shout once during the life of the option. So buyer of shout option gets additional option to shout once during option life time. S(T): stock price at time T(maturity) S(t): stock price at time t(time of shout) So final payoff is either payoff at time T or payoff at time...

Lookback options are of following types: 1)Floating Lookback call options: The options pay (S(T)-S(min)) at time T where S(T) is the value of asset at time T and S(min) is the minimum value of the asset observed during the time period T. 2)Floating Lookback put options: The options pay...

Ramd yes its seems correct but not exactly correct . But Type II error=1-Power of test. and how you got the critical value, i got it this way z=(Xbar cric - µ1)/(SD/sqrt of n) => (Xbar cric - µ1)=z*(SD/sqrt of n) => Xbar cric=µ1+z*(SD/sqrt of n) now critical values of X are at z(α = 2.5%) and...

RK17 i think you shall recieve your certificate by the end of this month. may be its laziness on the part of garp people or that your CV is last in the line of CVs which needs to be verified whatever be the case you just keep your cool. thanks

Binary options are another class of exotic options: 1) Cash or Nothing 2) Asset or Nothing Cash or Nothing option pays a fixed amount of cash Q if at time to maturity S(T)>K otherwise pays nothing. The net pay today, =PV of future payment at time T if S(T)>K = PV of [(future...

these are the answers what i got!!!!please see my explanation..

please refer to the link:http://www.facebook.com/garpfrm/posts/343568202321170 You might be in the queue andmust be receiving the mail from garp shortly. From link http://www.garp.org/frm/faqs/more-faqs.aspx i can refer that those who have uploaded CV between June 23 - September 21, 2012 the...

1. Bear spread with two calls c1 and c2: long c1 and short c2 such that K1>K2 value of call=max(S-K,0) also evident from BSM, call=S0N(d1)-Kexp(-rT)N(d2) =>value is negatively related to exercise price so higher K implies lower call value. so value of c2>c1=> if i pay x for c1 and get y for c2...

Barrier options: The options are special where options comes into existense when stock price hits a particular price barrier are called the In options. Whereas when options dies when stock price hits a particular price barrier are called the Out options. When stock price hits barrier from below...

Chooser options: Chooser options are a combination of put and call options. The chooser option allows investors to choose whether the option they hold is a call or a put at time T1 with maturity T2>T1. At time T1 value of option is max(c,p) ...1 from put call parity relation...

Forward Options are the options that start their life at future time T1. They are often given to employees in from of Employees Stock options(ESOP). Their strike price often assumes the value of the asset at the time T1 when option comes into existence. So if the asset price is S1 after time T1...