Stratégies Options

►A

Accrued Interest
- Interest that is earned but not yet paid on a bond or other obligation.

American exercise
It's a provision that permits exercise of an option any time prior to expiration.

Ask
- This is the best price on a market someone wants to sell a security, an asset or a derivative

Asset
- An asset represents ownership of value that can be converted into cash.

ATMF - "At The Money Forward"
- An option is said to be At the money forward when the strike is at the same level as the forward. There are many interesting option relationships when it happens

Asian option
- It's an option whose expiration value depends on the average value of an underlier over a specified period.

Arbitrage
- It's a transaction that generates a risk-free profit

►B

Bid
- This is the best price on a market someone wants to buy a security, an asset or a derivative

Binary
- A binary option (also called a digital option) is an option that has a discontinuous payoff. Binary options come in many forms, but the two most basic are: cash-or-nothing and asset-or-nothing. Each can be European or American and can be structured as a put or call.

Binomial (model)
- the binomial model is the simplest model for asset prices, used for pricing derivatives

Black & Scholes or Black Scholes Merton
- Black & Scholes, Black Scholes Merton or BSM, is the most famous model for pricing derivatives. It leads to option prices knowing volatility, strike, rates, maturity, dividend and spot level.

Barrier option
- It's a path dependent option that terminates or is activated by the underlier reaching some "barrier" level.

Bid-ask spread
- The difference between prices at which dealers are willing to buy or sell.

Butterfly spread
- It's an options spread that combines a long strangle with a short straddle.

►C

Call
- It's an option to purchase an asset. It's a derivative that is the right but not the obligation to buy an asset for an agreed amount at or during a specified time in the future

Cash settlement
- A derivative instrument has cash settlement if it settles for a cash payment in lieu of physical delivery of an underlier.

►D

Delta
- This is the rate of change of a derivative with respect to spot move, the Greek factor sensitivities measuring a portfolio's first order (linear) sensitivity to the value of an underlier.

Derivatives
- Derivatives are financial instruments which derives its value from the value of some other financial instruments or variables.

Dynamic Hedging
- It's a technique that is widely used by derivatives dealers to hedge gamma or vega exposures.

►E

Exercise
- This is the way to transform a derivative into an asset

European exercise
- It's a provision that permits exercise of an option only at expiration.

Exotic derivative
- It's a complicated or specialized derivative instrument.

►F

Forward
- A forward is an agreement where one party promises to buy an asset from anaother party at some specified time in the future and at some specified price. No money changes hands until the delivery date of the contract.

Futures
- It's an exchange-traded derivative that is similar to a forward.

►G

GARCH
- Generalized Autoregressive Conditional Heteroskedastic processes are a form of stochastic process that are widely used in finance and economics for modeling conditional heteroskedasticity and volatility clustering, first proposed by Bollerslev (1986).

►H

Headhache
Headhache is what you get when trying to understand quantitative finance.

►I

Implied Volatility
Volatilities play an important role in financial engineering and especially in the valuation of various forms of options.
By applying a suitable backward option pricing formula, we calculate the annual volatility that would have to be input into the option pricing formula to obtain that price for the option. This is implied volatility

Interpolation
- Interpolation is any procedure for fitting a function to a set of points in such a manner that the function intercepts each of the points.

►K

Knock-in Option
- This is an option that becomes effective only if the underlier first reaches a specified barrier level.

Knock-out Option
- This is an option to immediately terminate if the underlier reaches a specified barrier level.

►L

Least Squares
- The method of least squares is an alternative to interpolation for fitting a function to a set of points. Unlike interpolation, it does not require the fitted function to intersect each point. The method of least squares is probably best known for its use in statistical regression, but it is used in many contexts unrelated to statistics.

►M

Margin calls
- A party who owes an obligation to another party posts collateral—typically consisting of cash or securities—to secure the obligation. In the event that the party defaults on the obligation, the secured party may seize the collateral. In this context, collateral is called margin. Because the value of an obligation and the value of posted collateral can change, a secured party typically wants to mark-to-market frequently, issuing a margin call to the securing party for additional collateral when needed.

►N

Numerical Solution
- It's a mathematical solution found by an iterative approach.

►O

Option
- An option is a contract, that gives one party the right, but not the obligation, to perform a specified transaction with another party according to specified terms.
Options can be:
- call options, which provide the holder the right to purchase an underlier at a specified price
- put options, which provide the holder the right to sell an underlier at a specified price.

►V

VaR
- Value-at-risk (VaR) is a category of risk metrics that describe probabilistically the market risk of a trading portfolio. All sources of market risk contribute to those probability distributions.

Volatility
- Volatility is the propension an asset has to move around its mean.

►W

Wiener process
Wiener process process is a continuous-time stochastic process named in honor of Norbert Wiener. It plays a major role in stochastic calculus and diffusion processes.

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