The Value of Uncertainty begins by tracing the growth in the equity derivative markets prior to the events of September , and demonstrates how exotic derivatives formed a significant component of that growth. It goes on to show that, with this growth, the mere decision of whether to use one model versus another became a significant contributor to valuation uncertainty. The book then focuses on equity derivative models, charting, step by step, how key assumptions on the dynamics of stocks impact on the value of exotics.

The presentation is technical, but always maintains a strong focus on intuition and practical applicability to the current market. George Kaye is an independent financial consultant with over a decade of experience as a quantitative analyst 'quant' in the investment banking industry. Starting at Credit Suisse First Boston's Product Development Group in , George quickly specialised in the field of equity derivatives, building models and infrastructure for the trading desks.

In , he left to join the Derivative Analysis Group of Goldman Sachs, where his responsibilities focused on building a methodology for model risk analysis of the firm's equity derivatives positions. In he returned to the front office, working in the equity derivatives section of the Quantitative Analysis Group of UBS Investment Bank, leaving at the end of to build his own derivatives software company.

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Please contact the seller directly if you wish to return an order. There is no free lunch with stocks and bonds. Options are no different.

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Options trading involves certain risks that the investor must be aware of before making a trade. This is why, when trading options with a broker, you usually see a disclaimer similar to the following:. Options involve risks and are not suitable for everyone. Options trading can be speculative in nature and carry substantial risk of loss.

As an example, wine is a derivative of grapes ketchup is a derivative of tomatoes, and a stock option is a derivative of a stock. Options are derivatives of financial securities—their value depends on the price of some other asset. An option is a derivative because its price is intrinsically linked to the price of something else.

Think of a call option as a down-payment for a future purpose. A potential homeowner sees a new development going up. That person may want the right to purchase a home in the future, but will only want to exercise that right once certain developments around the area are built. The potential home buyer would benefit from the option of buying or not.

Well, they can—you know it as a non-refundable deposit. The potential home buyer needs to contribute a down-payment to lock in that right. It is the price of the option contract. This is one year past the expiration of this option.

Now the home buyer must pay the market price because the contract has expired. Now, think of a put option as an insurance policy. The policy has a face value and gives the insurance holder protection in the event the home is damaged. What if, instead of a home, your asset was a stock or index investment? Buying stock gives you a long position.

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Buying a call option gives you a potential long position in the underlying stock. Short-selling a stock gives you a short position. Selling a naked or uncovered call gives you a potential short position in the underlying stock. Selling a naked, or unmarried, put gives you a potential long position in the underlying stock. Keeping these four scenarios straight is crucial. Here is the important distinction between holders and writers:.

Speculation is a wager on future price direction. A speculator might think the price of a stock will go up, perhaps based on fundamental analysis or technical analysis. A speculator might buy the stock or buy a call option on the stock. Options were really invented for hedging purposes. Hedging with options is meant to reduce risk at a reasonable cost. Here, we can think of using options like an insurance policy. Just as you insure your house or car, options can be used to insure your investments against a downturn.

Imagine that you want to buy technology stocks. But you also want to limit losses.

By using put options, you could limit your downside risk and enjoy all the upside in a cost-effective way. In terms of valuing option contracts, it is essentially all about determining the probabilities of future price events. The more likely something is to occur, the more expensive an option would be that profits from that event. For instance, a call value goes up as the stock underlying goes up. This is the key to understanding the relative value of options.

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The less time there is until expiry, the less value an option will have. Since time is a component to the price of an option, a one-month option is going to be less valuable than a three-month option. This is because with more time available, the probability of a price move in your favor increases, and vice versa. Accordingly, the same option strike that expires in a year will cost more than the same strike for one month.

See below an excerpt from my Options for Beginners course where I introduce the concept of time decay. Volatility also increases the price of an option. This is because uncertainty pushes the odds of an outcome higher. If the volatility of the underlying asset increases, larger price swings increase the possibilities of substantial moves both up and down. Physiotherapists play a key role in the interdisciplinary team caring for patients with physical injury after a traumatic event. Cardiopulmonary Physiotherapy Enantioselective Titanium-catalysed Transformations. Chiral titanium complexes are low-cost, low-toxicity and high-efficiency catalysts.

Impressive progress on enantioselective titanium-catalysed transformations Impressive progress on enantioselective titanium-catalysed transformations has been achieved in the past seven years, with exciting new discoveries ranging from basic reactions to novel methodologies. Despite this, the field has Erythrocytes: Physiology And Pathophysiology. The book covers the functional significance and properties of erythrocytes, their generation, senescence, and suicidal The book covers the functional significance and properties of erythrocytes, their generation, senescence, and suicidal death.

It further summarizes knowledge about hormones influencing erythrocyte formation including erythropoietin as well as disorders affecting and involving erythrocytes such as anemia, malaria, Examples in Markov Decision Processes.

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This invaluable book provides approximately examples illustrating the theory of controlled discrete-time Markov processes. Except for applications of the theory to real-life problems like stock exchange, queues, gambling, optimal search etc. The book intends to give a state-of-the-art overview of flexoelectricity, a linear physical coupling between The book intends to give a state-of-the-art overview of flexoelectricity, a linear physical coupling between mechanical orientational deformations and electric polarization, which is specific to systems with orientational order, such as liquid crystals.

Chapters written by experts in the field shed Imperial College Press.