The possibility of hedging is essential for a product to be spread. When the bank manages a hedging portfolio using the Black-Scholes formula, it is not on average price over its time scale that will determine the amount required at maturity, it is th e price at each inst ant of time whatever th e development of risk . Up to the errors of the approximating models, that from experience are sufficiently small for products where th ere are plenty of transactions, products are said to be in the money.
KeywordsCash Flow Financial Market Underlying Asset Bank Activity Exercise Price
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