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Basic Concepts In Options Pricing

  • Robert Tompkins
Part of the Finance and Capital Markets book series (FCMS)

Abstract

In this chapter, I will examine option concepts by using options on IBM stock as our sample underlying asset. Table 2.1 displays the contract specifications for this option contract traded at the Chicago Board Options Exchange (CBOE). This allows one to either buy or sell 100 shares of IBM stock at or before a variety of expiration dates.

Keywords

Stock Price Option Price Call Option Implied Volatility Strike Price 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Notes

  1. 1.
    This is the “big one”: Black, F. and Scholes M, “The Pricing of Options and Corporate Liabilities”. Journal of Political Economy, May–June 1973, pp. 637–59. While Black and Scholes got all the glory, Robert C. Merton of MIT was hot on the trail of solving the problem and barely missed out. See Merton, R. “Theory of Rational Option Pricing”. Bell Journal of Economics and Management Science, Spring 1973, pp.141–83CrossRefGoogle Scholar

Copyright information

© Palgrave Macmillan, a division of Macmillan Publishers Limited 1994

Authors and Affiliations

  • Robert Tompkins

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