In several of the preceding chapters reference has been made to the use of options in creating special types of payoff profile. Indeed Chapter 1 provided an intuitive illustration of how a one-period collar could be established in the context of a short-term interest rate example, whilst in Chapter 2 long and short positions in puts and calls were presented as a means of hedging an index-tracking equity portfolio. This chapter builds on those examples and examines how other special types of option specification might be used to create similar payoffs in a less expensive manner.
KeywordsCall Option Fund Manager Strike Price Dividend Yield Barrier Option
Unable to display preview. Download preview PDF.
- Boyle, P. and S. H. Lau, ‘Bumping up against the Barrier with the Binomial Method’, Journal of Derivatives, Summer 1994, pp. 6–14.Google Scholar
- Clewlow, L. and A. Caverhill, ‘On the Simulation of Contingent Claims’, FORC Preprint:95/56 Financial Options Research Centre, University of Warwick.Google Scholar
- Clewlow, L., J. Llanos and C. Strickland, ‘Pricing Options in a Black—Scholes World’, FORC Preprint:94/54 Financial Options Research Centre, University of Warwick.Google Scholar
- Clewlow, L. and C. Strickland, ‘Implementing Financial Engineering’, FORC Preprint:95/56 Financial Options Research Centre, University of Warwick.Google Scholar
- Hull, John C., Options, Futures, and other Derivatives, 3rd edn, Prentice-Hall International (1997).Google Scholar
- Lyuu, Yu-Dauh, ‘Very Fast Algorithms for Barrier Option Pricing and the Ballot Problem’, The Journal of Derivatives, Vol. 4, Spring 1998, pp. 68–79.Google Scholar
- Ritchken, P., ‘On Pricing Barrier Options’, The Journal of Derivatives, Winter 1995, pp. 19–28.Google Scholar
- Rubinstein, M., ‘Pay Now Choose Later’, Risk, Vol. 4, No. 2, February 1991, p. 13.Google Scholar
- Rubinstein, M., ‘Options for the Undecided’, Risk, Vol. 4, No. 4, April 1991, p. 43.Google Scholar
- Rubinstein, M. and E. Reiner, ‘Breaking Down the Barriers’, Risk, Vol. 4, No. 8, September 1991, pp. 28–35.Google Scholar
- Thomas, B., ‘Something to Shout About’, Risk, Vol. 6, No. 5, May 1993, pp. 56–8.Google Scholar
- Tomkins, R., Options Explained, Macmillan (1996).Google Scholar
- Yu, G. George, ‘Financial Instruments to Lock In Payoffs’, The Journal of Derivatives, Spring 1994, pp. 77–85.Google Scholar