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Option Pricing Curve |
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Option Pricing Curve A 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 Option Pricing Curve A graph showing the price of an option as a function of time. The price at a given point is calculated according to the Black-Sholes Option Pricing Model, and accounts for the market value of the underlying, the strike price, and the expiration date, among other factors. Mathematically, at each price of the option, the slope is equivalent to the delta; that is, the option pricing curve shows the changes in the price of the option over a period of time. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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