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Suppose S 1 (t) and S 2 (t) are the prices of two risky assets at time t, and that each has a constant continuous dividend yield q i. The option, C, that we wish to price gives the buyer the right, but not the obligation, to exchange the second asset for the first at the time of maturity T. In other words, its payoff, C(T), is max(0, S 1 (T ...
Time value is the amount the option trader is paying for a contract above its intrinsic value, with the belief that prior to expiration the contract value will increase because of a favourable change in the price of the underlying asset. The longer the length of time until the expiry of the contract, the greater the time value. So, Time value ...
The similar situation works among currency forwards, in which one party opens a forward contract to buy or sell a currency (e.g. a contract to buy Canadian dollars) to expire/settle at a future date, as they do not wish to be exposed to exchange rate/currency risk over a period of time. As the exchange rate between U.S. dollars and Canadian ...
Foreign exchange option – the right to sell money in one currency and buy money in another currency at a fixed date and rate. Strike price – the asset price at which the investor can exercise an option. Spot price – the price of the asset at the time of the trade. Forward price – the price of the asset for delivery at a future time.
To make comparisons based on dates (e.g., if the current date and time is after some other date and time), first convert the time(s) to the number of seconds after January 1, 1970, using the function {{#time: U }}, then compare (or add, subtract, etc.) those numerical values.
Triangular arbitrage opportunities may only exist when a bank's quoted exchange rate is not equal to the market's implicit cross exchange rate. The following equation represents the calculation of an implicit cross exchange rate, the exchange rate one would expect in the market as implied from the ratio of two currencies other than the base currency.
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The value of the depth > is constant before and after a trade is executed, so the LT trading condition defines a level curve. For a fixed value of the depth κ {\displaystyle \kappa } , the level function φ κ {\displaystyle \varphi _{\kappa }} (also known as the forward exchange function [ 5 ] ) is such that f ( x , y ) = κ 2 x = φ κ ( y ...