30 years: Risk management & derivatives trading
In this video, Lindsey walks us through a basic option valuation technique that all market participants should know.
In this video, Lindsey walks us through a basic option valuation technique that all market participants should know.
11 mins 57 secs
Valuation of options is based on the price of the underlying instrument. Complex option valuations will require models, however there are simpler valuation methods for less complex valuations. If you are able to value the out-of-the money option, the value of the other option can be inferred from that, using the put-call parity. It can be used by investors to help them in valuation, risk management and pricing.
Key learning objectives:
Understand how to value options using a simple valuation relationship
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