Zvi Wiener

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Financial Risk Management

• Zvi Wiener
• Following
• P. Jorion, Financial Risk Manager Handbook

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Chapter 6Options

• Following P. Jorion 2001
• Financial Risk Manager Handbook

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Assumptions of BS

• The underlying price moves continuously
• Interest rates are known and constant
• The variance of returns is constant
• Perfect capital markets
• no transaction costs
• short sales are allowed
• markets operate continuously
• price taking

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Exchange Option (Margrabe 78)

• r should be replaced by the difference of yields
  of the two assets.