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Two state option pricing model |
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Two state option pricing modelA pricing equation allowing an underlying asset to assume only two possible (discrete) values in the next time period for each value it can take on in the preceding time period. Also called the underlying asset.Two state option pricing model Similar MatchesRegulatory pricing riskRegulatory pricing riskRisk that arises when insurance companies are subject to regulation of the premium rates that can they charge. Administrative pricing rulesAdministrative pricing rulesIRS rules used to allocate income on export sales to a foreign sales corporation. Capital asset pricing modelCapital asset pricing modelA model for generating expected equity returns. It is based on the premise that returns are the reward for taking on risk, and that risk can be split into two types: stock-specific risk and market risk.Since stock-specific risk can be mitigated by diversification policies, investors should not be compensated for taking this on. Expected returns should only be a function of the share's response to returns on the market as a whole, which is given by the share's beta. Option Pricing CurveOption Pricing CurveA graphical representation of the projected price of an option at a fixed point in time. It reflects the amount of time value premium in the option for various stock prices, as well. The curve is generated by using a mathematical model. The delta (or hedge ratio) is the slope of a tangent line to the curve at a fixed stock price. See also Delta and Hedge Ratio Pricing to marketPricing to marketThe practice of an exporting firm holding fixed (or not fully adjusting) the price it charges in the export market when its costs or exchange rate change. See pass-through. Seminal treatment was Krugman (1987). Further SuggestionsCapital asset pricing model (CAPM)Garman Kohlhagen option pricing model forward pricing Binomial option pricing model Transfer pricing Indication pricing schedule Repricing Asset pricing model Underpricing Pricing efficiency International Asset Pricing Model (IAPM) Forward pricing Arbitrage free option pricing models |
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