No-arbitrage

2 stories tagged No-arbitrage on Learning Fanatic.

Lesson 6.1: Option payoffs and put-call parity Learn what calls and puts pay at expiry, how to combine options into straddles, spreads and covered calls, and how put-call parity ties option prices together.
Lesson 7.3: Risk-neutral pricing, change of measure and no-arbitrage Learn why derivatives are priced by replication, what risk-neutral probabilities are, how Girsanov's theorem works and why the real-world return drops out.