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Financial Mathematics

Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk

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Page 1: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk

Financial Mathematics

Page 2: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 3: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 4: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 5: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 6: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk

In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.

Page 7: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 8: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 9: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 10: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 11: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 12: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 13: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 14: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 15: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 16: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 17: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 18: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 19: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 20: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 21: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 22: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 23: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 24: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 25: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 26: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 27: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 28: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 29: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk

central limit theorem (CLT) states that the sum of a large number of independent and identically-distributed random variables will be approximately normally distributed (i.e., following a Gaussian distribution, or bell-shaped curve) if the random variables have a finite variance.

Page 30: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 31: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 32: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 33: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 34: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 35: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 36: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 37: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 38: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk

Call Option

http://en.wikipedia.org/wiki/Call_option

Put Option

http://en.wikipedia.org/wiki/Put_option

Lets look at some equity option markets

http://quote.morningstar.com/Option/Options.aspx?ticker=AAPL&sLevel=D

Page 39: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 40: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 41: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 42: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 43: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 44: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 45: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 46: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 47: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 48: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 49: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk
Page 50: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk

Black Scholes Pricing Option Formula

• http://en.wikipedia.org/wiki/Black-Scholes

Page 51: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk

Statistical Arbitrage

Page 52: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk

Pairs Trading

• http://en.wikipedia.org/wiki/Pairs_trade

• Ford and GM

• http://finance.google.com/finance?q=ford

Page 53: Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk

Co-Integration

• Excel: Simple_Cointegration_Example.xls