Financial Derivatives: Probability that Call Option Will Expire Into Money
Sunday, September 27th, 2009 at
11:56 am
Calculation of the probability that call option on the stock will expire into money. We assume that return on the stock follows Geometric Brownian motion (GMB). I recommend: 1. Neil Chriss, Black-Scholes and Beyond 2. John Hull, Options, Futures, and Other Derivatives 3. youtube.com
Tagged with: Brownian • call • derivatives • financial • Geometric • motion • option • vorojtsov
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great video! 5/5
Please leave a comment if you watched the whole video. I am really curious how many people watched the whole thing. 52 minutes is a huge time commitment. Thank you!
well, i watched the whole video, and time just flew!
it was very interesting, informative and clearly articulated. the only small detail i would like to point out, is: maybe it would have been useful (especially for beginners), if you had made a clearer distinction between instant. values and values for the timeinterval T (assuming t=0) with for example an index, like: (u, sigma) and (u_T and sigma_T).
Thanks for the great video! Hope there are more finance-math videos to come!
Thank you very much for the comment, kaylon99! All suggestions are very welcome and taken into account!
I didn’t know you were into stocks…. awesome stuff!
Thank you! Right now I am just learning and trying to figure it out.
Hi, I watched the whole video.
The most interesting part for me was around 30mins.
So if you invest money into a risk neutral market, i.e. a market that has an expected profit value 0 in a very small timeframe, you still end up losing money in the long run, because of the variance according to the equation at 31mins, if I understood that right.
If so that is very counter intuitive.
Thanks for the video.
Hi mvogt! I agree it is counter-intuitive. However from pure mathematics if you take the rate of return following GBM and have non-zero variance then one can clearly see that it does suppresses the expected rate of return on the stock in the long run. Thank you for comment! I may produce another video if I come up with a better way to illustrate this point.
I’ve actually watched this video more than once. I made my first investment a year ago and have little understanding of finance calculations. The math gets a little advanced for me toward the end, so I keep watching until the theory sinks in. Thanks for taking the time to put this video together, Vorojtsov; it’s fascinating.
Hi dis00a! You are welcome! If you would like to get more details please refer to Neil Chriss, “Black-Scholes and Beyond”.
Thank you for your video Serguei. Your video helped alot. I have wanted to invest for some time now. I have also watched it a couple times now.
make sure that when I leave some time from lagrangean and hamiltonian mechanics I will whatch the whole video…great work mate!
Thank you, navajo5150!
great work. high quality and ability to make sense mathematics tools.
cordialement
I know I’ve hit rock bottom when I’m searching for even youtube clips to help me pass my next derivatives test.
*sigh*
Very helpful. My securities exam is 17 days away – thanks for the help.
Hydrologist and structural dynamicists use randon process and stochastic process in their day today work activities but they dont play with the money of poor people to make lot of bonuses and bring the whole economy down.
intantaneous rate of return ;(, you forgot an important variable called [Delta Patience] in relation to [Delta production of tactical sales invoices], its an inverse variable of Instantaneous Rate of Return. This is because of the technical fluctuations in the brownian motion of the larger particals depending on this Delta P micro level tactical particles . When gold is mechanically ground down to a powder and even smaller than the finest powder, it is soluable and water is the CURRENT solvent!
1-Copy and Paste this message to 8 other videos
2-Go to your channel and look at you background.
it might freak you out!
what device are you using to wrtie on your screan? its really cool and thanks very well done presentation
Thank you! You are a very good teacher. Everything you explain in your videos is easy to understand. I grasp concepts that before have baffled me, even when they were explained to me by others that knew and studied the subject for years.
perfect addtion to my studies, thx!