The London International Financial Futures and Options Exchange (LIFFE, pronounced 'life') is a futures exchange based in London. LIFFE is now part of NYSE Euronext following its takeover by Euronext in January 2002 and Euronext's merger with New York Stock Exchange in April 2007.A futures and options exchange in London, England that was modeled after the Chicago Board of Trade … [Read more...]
Globally Floored Contract
Globally Floored Contract is a guarantee found in structured investment products that provides a minimum payoff at maturity. A globally floored contract will protect the investor or minimize his loss in case the underlying investment loses its value. With principal-protected notes, an investor receives a guarantee providing downside protection on the investment. A cost … [Read more...]
Booking the Basis
A table or book of tables showing the yields of bonds at different interest rates and maturities. For example, if one is considering the purchase of a bond, one can take the coupon rate and the maturity and compare them in the basis book to determine the yield. The basis book is good for approximating yields, but financial calculators tend to be more accurate, especially for … [Read more...]
Black Scholes Model
The Black–Scholes model is a mathematical description of financial markets and derivative investment instruments. The model develops partial differential equations whose solution, the Black–Scholes formula, is widely used in the pricing of European-style options.A model of price variation over time of financial instruments such as stocks that can, among other things, be used to … [Read more...]
Binomial Option Pricing Model
The binomial options pricing model (BOPM) provides a generalizable numerical method for the valuation of options. The binomial model was first proposed by Cox, Ross and Rubinstein (1979). Essentially, the model uses a "discrete-time" model of the varying price over time of the underlying financial instrument.An options valuation method developed by Cox, et al, in 1979. The … [Read more...]