Chapter

Introduction

Tomas Björk

in Arbitrage Theory in Continuous Time

Second edition

Published in print March 2004 | ISBN: 9780199271269
Published online October 2005 | e-ISBN: 9780191602849 | DOI: http://dx.doi.org/10.1093/0199271267.003.0001

Series: Oxford Finance Series

Introduction

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This introductory chapter starts off the discussion on financial derivatives by explaining the European call option. It formulates the two main problems that will be the focus of the entire volume: What is a “fair” price for the contract? How does one protect (hedge) against the financial risks resulting from the sale of a derivative? The definition of financial derivative is then presented.

Keywords: financial derivatives; risk; European call option; hedge; contract; price

Chapter.  1913 words. 

Subjects: Financial Markets

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