Various Approaches to Options Pricing

1
Various Approaches to Options Pricing

• Robert Goldberg

2
Option Price vs Valuation
Price
Valuation
3
Finding that Price

• EUR GBP CZK SKK PLN HUF RUB TRY ILS EUR GBP CZK
  SKK PLN HUF RUB TRY ILS EUR GBP CZK SKK PLN HUF
  RUB TRY ILS EUR GBP CZK SKK PLN HUF RUB TRY ILS
  EUR GBP CZK SKK PLN HUF RUB TRY ILS EUR GBP CZK
  SKK PLN HUF RUB TRY ILS EUR GBP CZK SKK PLN HUF
  RUB TRY ILS EUR GBP CZK SKK PLN HUF RUB TRY ILS
  EUR GBP CZK SKK PLN HUF RUB TRY ILS EUR GBP CZK
  SKK PLN HUF RUB TRY ILS EUR GBP CZK SKK PLN HUF
  RUB TRY ILS EUR GBP CZK SKK PLN HUF RUB TRY ILS
  EUR GBP CZK SKK PLN HUF RUB TRY ILS EUR GBP CZK
  SKK PLN HUF RUB TRY ILS EUR GBP CZK SKK PLN HUF
  RUB TRY ILS EUR GBP CZK SKK PLN HUF RUB TRY ILS
  EUR GBP CZK SKK PLN HUF RUB TRY ILS EUR GBP CZK
  SKK PLN HUF RUB TRY ILS EUR GBP CZK SKK PLN HUF

4
Finding that Price

• EUR GBP CZK SKK PLN HUF RUB TRY ILS EUR GBP CZK
  SKK PLN HUF RUB TRY ILS EUR GBP CZK SKK PLN HUF
  RUB TRY ILS EUR GBP CZK SKK PLN HUF RUB TRY ILS
  EUR GBP CZK SKK PLN HUF RUB TRY ILS EUR GBP CZK
  SKK PLN HUF RUB TRY ILS EUR GBP CZK SKK PLN HUF
  RUB TRY ILS EUR GBP CZK SKK PLN HUF RUB TRY ILS
  EUR GBP CZK SKK PLN HUF RUB TRY ILS EUR GBP CZK
  SKK PLN HUF RUB TRY ILS EUR GBP CZK SKK PLN HUF
  RUB TRY ILS EUR GBP CZK SKK PLN HUF RUB TRY ILS
  EUR GBP CZK SKK PLN HUF RUB TRY ILS EUR GBP CZK
  SKK PLN HUF RUB TRY ILS EUR GBP CZK SKK PLN HUF
  RUB TRY ILS EUR GBP CZK SKK PLN HUF RUB TRY ILS
  EUR GBP CZK SKK PLN HUF RUB TRY ILS EUR GBP CZK
  SKK PLN HUF RUB TRY ILS EUR GBP CZK SKK PLN HUF

PRICE
5
Approaches to Pricing Options

1. Historical Prices
2. Indicative Prices
3. Live Prices

6
Historical Prices

• Internet

Historical Options Prices
7
Historical Prices

• Internet
• Exchanges

Historical Options Prices
8
Historical Prices

• Internet
• Exchanges
• Financial Data Vendors e.g. SuperDerivatives

Historical Options Prices
9
Historical Prices

• Internet
• Exchanges
• Financial Data Vendors e.g. SuperDerivatives
• Brokers

Historical Options Prices
10
Indicative Prices
11
Live Prices
10.70
10.65
10.50 10.60
10.40
10.25
12
EXCHANGES
ADVANTAGES
DISADVANTAGES
Multiple Participants Standardised
Format Anonymous Access
Clearer Relationship Required Restricted
Contracts
13
BANKS
ADVANTAGES
DISADVANTAGES
Relationship Required Bank may know your
direction You may give away direction
High Liquidity Single Bank Platforms
14
BROKERS
ADVANTAGES
DISADVANTAGES
Slow in fast market Expensive Credit Issues
Tight prices Anonymous
15
MULT-BANK PLATFORMS
ADVANTAGES
No OTC restrictions Tight prices Aggregation
with Stack of Prices Options Prices are
Instant. No Credit Issues Anonymous Trading and
Price Discovery
16
So What is My Option Price?