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Options and analysis of the option strategy Straddle Strangle
Černocký, Jan ; Witzany, Jiří (advisor) ; Polák, Michal (referee)
The bechlor thesis is focused on the option strategy Straddle Strandle with emphasis on the practical aspect of this issue. At the begining, there are explained basics of option theory and influances that affect their value. Furthermore, the introduction of non-directional option strategies and the detailed description of strategy Straddle Strangle. In the last part, the strategy is applied in market conditions and the results are analysed.
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The Derivatives Markets Development Analysis During Financial Crisis
Zikmund, Michal ; Dvořák, Petr (advisor) ; Pumprová, Zuzana (referee)
The aim of my final thesis is the derivatives markets development analysis during financial crisis. Through basic problems with derivatives accounts of Lehman Brothers we can assess needs of standardization and transparency in area of derivatives instruments with such result which has minimal impact for liquidity on derivatives market. In the next step, there was analyzed year 2008 alone because of bankruptcy announcement of Lehman Brothers and therefore was analyzed impact on derivatives product lines in organized market in this year. Last part of thesis is analyzing development of number and change in traded derivatives contracts, options and futures, in organized market differentiated by products lines since 2002 to 2010.
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Valuation of PX Index Options with NGARCH Volatility and Time Dependent Expected Risk Free Rate
Štěrba, Filip ; Málek, Jiří (advisor) ; Kodera, Jan (referee) ; Hnilica, Jiří (referee)
The main purpose of this thesis is to propose the valuation method of PX index options. PX index consists of blue chip stocks traded on Prague Stock Exchange. There are traded a few futures contracts on PX index on Prague Stock Exchange. However, the options on PX index are traded neither on Prague Stock Exchange nor on the OTC market. It is reasonable to think that it is only question of time when the trading of these options will emerge and thus, it is highly relevant subject of research to propose the method for valuation of these options. The traditional Merton's approach for valuation of equity index options assumes constant volatility and constant risk free rate. This results in serious mispricing which can be easily seen when we compare market prices and Merton formula derived prices. Instead, this thesis releases the assumptions of constant risk free rate and constant volatility. Firstly, it is assumed that that the risk free rate is time dependent function based on current market expectations and secondly it is assumed that the volatility of underlying asset follows NGARCH-mean process. For the purpose of former, the validity of pure expectation theory assumption is made. This enables to employ the instantaneous forward rate curve estimation procedure. For the purpose of the latter, the locally risk-neutral valuation relationship is applied. The assumption of NGARCH-mean process is essential in an effort to capture usually observed patterns of volatility (volatility skews) whereas the assumption of time dependent risk free rate still moves the valuation option model closer to the reality. The author derives the expected path of risk free rate and estimates the parameters of NGARCH process. Subsequently, the empirical martingale Monte Carlo simulation is used to price the PX options with different moneyness and with different times to maturity. It is shown that this proposed model results in volatility pattern which is usually observed on developed markets and the author's results are in line with similar empirical studies testing the GARCH Option Pricing Theory. The author concludes that proposed valuation method superiors original Merton's model and thus is more appropriate for primary valuation of PX options.
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Valuation of foreign exchange options and forwards and their accounting recognition based on IFRS and US GAAP
Pecka, Jiří ; Hnilica, Jiří (advisor) ; Novotný, Radek (referee)
I would like to divide my diploma thesis into two parts: theoretical and practical. In the theoretical part, I will outlint the area of hedge accounting pursuant to IAS 39 and FAS 133, including distinction between cash flow hedge and fair value hedge. In the next chaper, I will deal with general characteristics of forwards, including their accounting aspects and their valuation methods. In the next chapter, I will deal with selected characteristics of options (e.g., time and intrinsic value of the option with the emphasis on the accounting differences between IFRS and US GAAP). In the next chapter, I will outlint the general aspects of vanilla and exotic options (e.g.. knock-in and knock-out barrier option and so called "range accruals"). An integral part of this chapter will be formed by the introduction to their valuation (Black-Scholesův model, Garman-Kohlhagenův model, binomic model, method Monte Carlo). In the nexch chapter, I will deal with the general characteristics of the foreign exchange risk and related accounting aspects. In the practical part, I will deal with particular examples of the foreign exchange hedge via forwards and options (including their valuation and accounting recognition pursuant to US GAAP and IFRS): a) Cash flow hedge through option tunnel, ie., by means of standard put and call option, b) Cash flow hedge through participating forward, ie. combination of put option and forward c) Cash flow hedge throug knock-in forward, ie. combination of knock-in barrier option and forward d) Cash flow hedge through KIKO forward, ie. combination of knock-in and knock-out opce and forward e) Hedge through "range accrual" option
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Derivatives in family finances
Varecha, Martin ; Smrčka, Luboš (advisor) ; Zámečník, Petr (referee)
This thesis focuses on the derivatives market. The goal is to choose ones that are suitable for use for the benefit of family finances and planning. Mapping the world market derivatives, and then describes the basic characteristics of the main types of contracts. After the general characteristics of the derivatives in the introduction, are briefly described two types (forwads and swaps) that are not directly used in the family finances. In their description, however, are pointed out the fundamental principles of derivatives and trading with them. In the next section, the focus is on those derivatives that are suitable for use in household budgets. They include Futures, Options, Warrants, Investment Certificates, Exchange Traded Funds (ETF), Contracts for diference (CFD). There are also discussed basic principles of these instruments, their use and the current bid.
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The Iron Condor options strategy
Hrečka, Marek ; Smrčka, Luboš (advisor) ; Zámečník, Petr (referee)
The thesis is focused on a detailed analysis of the Iron Condor options strategy with an emphasis on practical aspects of using the strategy to speculation. In the first part basics of option theory, option pricing fundamentals and the Iron Condor mechanism are explained. The practical part deals with development of a trading system using knowledge gained in the theoretical part. Setting-up system parametres, their analysis and optimization for trading the Iron Condor on the Russell 2000 are crucial points of the thesis. In conclusion, there is a summary of real trading results.
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Accounting of currency contracts
Jílková, Simona ; Pelák, Jiří (advisor)
I have chosen the topic of accounting for foreign exchange contracts for my barchelor thesis. These forms of term trading have recently become increasingly widespread there on foreign exchange markets, both because of the possibility of risk caused by exchange rate volatility, both the possibility of arbitrage, or speculation. The main aim of this work is to give readers a view of their essence, operation and last but not least, their views on valuation and accounting.
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Use of financial derivatives in business
Müller, Tomáš ; Marek, Petr (advisor) ; Podškubka, Tomáš (referee)
The paper shows the main possibilities of using financial derivatives in business with an emphasis on Czech corporate clients. It describes selected types of financial derivatives, such as forwards, futures, FRA, options, warrants and investment certificates. Based on practical examples, it shows the possibilities of using selected financial derivatives to hedge currency, interest rate and commodity risk, and also to evaluate funds of an entrepreneur. It also analyzes and compares individual possibilities and attempts to point out main advantages and disadvantages of using financial derivatives in practical business.
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Opční strategie
Berezkin, Áron ; Witzany, Jiří (advisor) ; Witzany, Jiří (referee)
The bachelor thesis is focused on a detailed analysis of the option strategy Iron Condor. In the introductory chapter the reader is sufficiently familiarized with basic functioning of the options and with influences that affect their value. Furthermore, detailed description of the strategy Iron Condor is provided including the strategy related context, which a trader needs to be aware of in order to be able to execute the strategy. In conclusion, the strategy is backtested on the U.S. index RUT and the results are analyzed.
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Valuation of options with stochastic volatility
Duben, Josef ; Málek, Jiří (advisor) ; Hudec, Patrik (referee)
The thesis is dealing with option pricing. The basic Black-Scholes model is described, along with the reasons that led to the development of stochastic volatility models. SABR model and Heston model are described in detail. These models are then applied to equity options in the times of high volatility. The models and their application are then evaluated.
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