Option Right
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See: Economic Choice, Economic Right, Economic Obligation, Economic Transaction, Agreed Price.
References
2012
- http://en.wikipedia.org/wiki/Option_%28finance%29
- In finance, an option is a contract which gives the owner the right, but not the obligation, to buy or sell an underlying asset or instrument at a specified strike price on or before a specified date. The seller incurs a corresponding obligation to fulfill the transaction, that is to sell or buy, if the long holder elects to "exercise" the option prior to expiration. The buyer pays a premium to the seller for this right. An option which conveys the right to buy something at a specific price is called a call ; an option which conveys the right to sell something at a specific price is called a put.
The value of an option has two components. First is its "intrinsic value" which is the difference between of the market value of the underlying item and the strike price for a given option. The second is based on a set of other factors which, through a complex interrelationship, reflect the discounted expected value of that difference at expiration. The valuation of options is an ongoing topic of research in academic and practical finance. The contemporary study of options valuation is based on the Black-Scholes model which was first published in 1973.[1]
- In finance, an option is a contract which gives the owner the right, but not the obligation, to buy or sell an underlying asset or instrument at a specified strike price on or before a specified date. The seller incurs a corresponding obligation to fulfill the transaction, that is to sell or buy, if the long holder elects to "exercise" the option prior to expiration. The buyer pays a premium to the seller for this right. An option which conveys the right to buy something at a specific price is called a call ; an option which conveys the right to sell something at a specific price is called a put.
- ↑ Black, Fischer; Myron Scholes (1973). “The Pricing of Options and Corporate Liabilities". Journal of Political Economy 81 (3): 637–654
- http://www.economist.com/news/books-and-arts/21566619-how-surprises-make-you-stronger-stress-best
- … being in a position where the unexpected allows improvement, where the potential gains from a surprising event outweigh the potential losses. The obvious example from finance is the option, which gives the buyer the right, but not the obligation, to undertake a transaction at an agreed price.
1973
- Fischer Black and Myron S. Scholes. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, 81 (3), 637–654 (1973).