Finance
Jehlifisch Universität, Herbstsemester 2013
Jehlifisch Universität, Herbstsemester 2013
-
- 1 / 306
-
Lernkarten
If prices are equal to their value, there are no arbitrage opportunities.
Behavioral finance tries to explain why prices can depart from their fundamental values.
Kahneman and Tversky provided empirical evidence that supports the thesis that investors are risk-averse regarding choices involving losses but risk-seeking regarding choices involving gains.
The inconsistent attitude of investors towards gains and losses is often subsumed under the “disposition effect”.
In the context of investments, overconfidence describes the behavior of market participants to assign overly large confidence intervals to their estimates.
In the context of investments, the anchoring bias describes the tendency of investors to overly rely on the first information provided.
A random variable can never be stationary.
If a random variable has a positive drift, its returns cannot be stationary.
If a random walk is i.i.d. (independent, identically distributed) the probability of a positive return is larger after a negative return than after a positive return.
In an efficient market, information is costless.
The small-firm effect provides evidence against market efficiency.
The buyer of a call option has the right to buy a determined underlying within a determined period at a previously determined price.
The seller of a put option has the right to sell a determined underlying within a determined period at a previously determined price.
It is possible that the owner of an option changes whereas the option writer remains the same.
Each option is a zero sum game: The amount that the owner of an option loses or wins equals the amount that the option writer wins or loses.
Whereas the right (option) of a European option can be executed at each day until maturity, the right (option) of an American option can only be executed at maturity.
The writer of a call option is one call option long.
A currency call option to buy CHF with an exercise price in EUR is the same as a put option on EUR with an exercise price in CHF.
The possible profit you can make by buying a call option is unlimited.
Options have a linear payoff profile.
The possible loss you can make by writing a call option is limited to the share price.
The highest possible payoff of a put option long is always limited to the strike.
The time value of a European call option can never become negative.
A call option is at-the-money when the price of the call option equals the price of the underlying.
Delta and Gamma both relate to the underlying.
A call price can never have the same value as the underlying.
A portfolio of a bond long, a put short and a call long on a nondividend paying share Y can pay off the same as share Y itself.
The price of a call option depends on the beliefs of market participants if the prices are going to increase or declines.
The fundamental idea of option valuation is the creation of replicating portfolios that payoff the same as the option.
Risk neutral valuation and replication yield different results.
As the number of steps in the Black-Scholes model is increased, the option price converges to the Binomial Model price.
The Black-Scholes Model assumes a normal distribution of returns.
Delta is the amount that the option prices changes when the underlying price is increased by 1 unit.
Rho has the same sign for call and put options.
For an Asian option, the average exercise price is equal underlying price.
The Merton model shows that – since debt holders are paid out first in case of default – an increase in risk is profitable for debt holders.
Equity volatility is independent of leverage.
An investor can create the same payoffs with: an underlying and a put option on the same underlying; a bond and a call option.
Volatility increases time value.
The CAPM can be used only if the firm is well-diversified
