Risk-Free Interest Rate
Describes return available to an investor in a security somehow guaranteed to produce that return. The risk-free interest rate compensates the investor for the temporary sacrifice of consumption.
security's risk-free interest rate.
Relative Price
Ratio of the price of one item to the price of another.
The schedule begins at the risk-free interest rate and rises as risk increases. Market sectors The classifications of bonds by issuer characteristics, such as state government, corporate, or utility.
Hedged portfolio A portfolio consisting of a long position in the stock and a long position in the put option on the stock, so as to be riskless and produce a return that equals the risk-free interest rate.
See: Delta Hedged portfolio A portfolio consisting of the long position in the stock and the long position in the put option, so as to be riskless and produce a return that equals the risk-free interest rate. Hedgie Slang for a hedge fund.
One of the attractive features of the Black-Scholes model is that the parameters in the model (other than the volatility) - the time to maturity, the strike, the risk-free interest rate,and the current underlying price - are unequivocally observable.
Investors will buy subordinated debt at a yield quite close to the risk-free INTEREST RATE only if they are sure the bank is low risk. To sell its debt, the bank will have to persuade informed investors of this.
Uses the stock price, the exercise price, the risk-free interest rate, the time to expiration, and the expected standard deviation of the stock return. Invented by Fischer Black and Myron Scholes in 1973.
r = risk-free interest rate (usually the money market rate for a maturity equal to the option's maturity.)
T = time to option's maturity, in years
ln = natural logarithm function ...
A model for pricing call options based on arbitrage arguments that uses the stock price, the exercise price, the risk-free interest rate, the time to expiration, and the standard deviation of the stock return.
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11. On the relationship between the market risk premium and the risk-free interest rate by confidence w. Amadi (Sep, 2005) Finance at Florida A&M University.
A line that indicates the minimum return required by investors at each level of investment risk. The schedule begins at the risk-free interest rate and rises as risk increases.
Market share ...
Describes return available to an investor in a security somehow guaranteed to produce that return. The risk-free interest rate compensates the investor for the temporary sacrifice of consumption.
Risk indexes ...
Market RRR (required rate of return) Schedule
A line that indicates the minimum return required by investors at each level of investment risk. The schedule begins at the risk-free interest rate and rises as risk increases.
Pricing Model: A model for pricing call options based on arbitrage arguments developed by Fischer Black and Myron Scholes (with insights from Robert Merton) in 1973. The model uses the stock price, the exercise price, the risk-free interest rate, ...
Definition: [crh] A line that indicates the minimum return required by investors at each level of Definition: "investment risk. The schedule begins at the risk-free interest rate and rises as risk increases.
Rho is one of the Greek factor sensitivities used by traders to measure market risk exposures in derivatives portfolios. It measures a portfolio's linear exposure to changes in the risk-free interest rate.
formula for determining option call price a complex mathematical formula for calculating an option's call price using the current price of the security, the strike price, volatility, time until expiration, and the risk-free interest rate ...
Trading in the stock is continous
There are no transaction costs
All securities are perfect divisible (possible to buy a fraction of a share
The risk-free interest rate is constant and the same for all maturities ...
The other major factors affecting the premium of an at-the-money option are the volatility and dividends of its underlying security along with the current risk-free interest rate (e.g. the T-bill rate).
F: future price; S: spot price of the underlying; e: exponential function; r: risk-free interest rate (constant from the underwriting of the contract and expiration); t: expiration of the contract (lenght).
Black-Scholes option-pricing model A model for pricing call options based on arbitrage arguments that uses the stock price, the exercise price, the risk-free interest rate, the time to expiration, and the standard deviation of the stock return.
 See also: Values, Yield curve, Banks, Expected return, Systematic risk
  
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