Mean and Option: Difference between pages

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1. Strictly, the same as the Arithmetic mean.
1.  
 
A financial option is a derivative instrument giving the holder the right - but not the obligation - to buy or sell an underlying asset on or before a future date at a specified price.
 
Options are more commonly ‘cash settled’ by paying or receiving a net cash amount, rather than being settled by physical delivery of the underlying asset.
 
 
Like other derivative instruments, options can be used to:
 
• Speculate by creating new exposures to market rates.
 
• Hedge existing exposures to changes in market rates.
 
• Arbitrage in combination with other related instruments to achieve 'risk free' profits.
 
 
When used for hedging purposes, options generally provide insurance-like protection against worst case outcomes.  (Contrasted with 'fixing' hedging instruments - such as FRAs - which effectively fix the market rate being hedged.)
 
 
2.
 
More generally, choice.
 
 
3.
 
A real option is an option relating to an operational decision or outcome.


2. The term 'mean' is also sometimes used much more loosely, to refer to any measure of the mid-point (or Central location) of a set of data.


== See also ==
== See also ==
* [[Arithmetic mean]]
* [[American-style option]]
* [[Central location]]
* [[Asian option]]
* [[Geometric mean]]
* [[Barrier option]]
* [[LIMEAN]]
* [[Binomial option pricing model]]
* [[Mean deviation]]
* [[Black Scholes option pricing model]]
* [[Mean reversion]]
* [[Call option]]
* [[Mean-variance efficiency]]
* [[Cash settlement]]
* [[Median]]
* [[Delta]]
* [[Mode]]
* [[Derivative instrument]]
* [[Pearson's Coefficient of Skew]]
* [[European-style option]]
* [[Standard deviation]]
* [[Exercise]]
* [[Variance]]
* [[Exotic option]]
* [[Fixing]]
* [[Fixing instrument]]
* [[Foreign exchange forward contract]]
* [[Futures contract]]
* [[Greeks]]
* [[Hedging]]
* [[Insurance]]
* [[Interest rate guarantee]]
* [[Interest rate option]]
* [[Outright]]
* [[Payoff]]
* [[Put option]]
* [[Put-call parity theory]]
* [[Real option]]
* [[Straddle]]
* [[Strike price]]
* [[Swaption]]
* [[Traded option]]
* [[Underlying asset]]
* [[Underlying price]]
* [[Volatility index]]
* [[Warrant]]


[[Category:Manage_risks]]

Revision as of 22:54, 29 October 2020

1.

A financial option is a derivative instrument giving the holder the right - but not the obligation - to buy or sell an underlying asset on or before a future date at a specified price.

Options are more commonly ‘cash settled’ by paying or receiving a net cash amount, rather than being settled by physical delivery of the underlying asset.


Like other derivative instruments, options can be used to:

• Speculate by creating new exposures to market rates.

• Hedge existing exposures to changes in market rates.

• Arbitrage in combination with other related instruments to achieve 'risk free' profits.


When used for hedging purposes, options generally provide insurance-like protection against worst case outcomes. (Contrasted with 'fixing' hedging instruments - such as FRAs - which effectively fix the market rate being hedged.)


2.

More generally, choice.


3.

A real option is an option relating to an operational decision or outcome.


See also