VaR Mapping of Option Positions
In this short video, we explore a basic mapping of European options (calls or puts) onto appropriate positions in underlying stock and dollar bills / zero coupon bonds.
Category: Swatches
Valuing Call Options on Bonds: Replication vs Risk-Neutral
In this short video, we explore two methods for valuing call options on bonds – risk neutral valuation and replicating portfolio approach.
Default Probabilities from Observed Rates and Spreads
In this short video, we play around with observed yields (for risk-free and risky securities), and imply from them default probabilities for the risky security.
Pricing a Bond: Replication vs Bootstrapping
In this short video, we take a comparative look at two valuation approaches for finding fair value of a fixed income instrument – replicating portfolio approach vs using rates recovered via bootstrapping.
Delta of an At-The-Money (ATM) Option
In this short video, we use the results that we already know – results from Quantitative Analysis section and from readings on Black Scholes Model and it’s Greeks to reason out the delta for an at-the-money call and put option.
Valuing Cross Currency Swaps: Equivalence of Bond & Fx Forward Methods
In this short video, we take an example of valuing a Cross Currency Swap, and perform this valuation via two approaches: the Bond Method and the Fx Forward Method.
Valuing Interest Rate Swaps: Equivalence of Bond & FRA Methods
In this short video, we take an example of valuing an Interest Rate Swap, and perform this valuation via two approaches: the Bond Method and the FRA Method.
Distribution of Payoffs of Simple Options
In this short video, we explore the distribution of option payoffs for simple options like calls and puts and for contracts like forwards, given the distribution of the driver of their payoffs – the stock price.
The Lognormal Distribution (FRM Part 1)
In this swatch, we spend some time exploring a very important distribution in option pricing – the lognormal distribution.
Absolute vs Relative VaR
In this swatch, we differentiate between Absolute and Relative Value-at-Risk (VaR). The distinction is important from the perspective of questions posed in the exam.