While it focused on the valuation of a financial option, Black and Scholes (1973) also discuss using this methodology on real assets as the underlying instrument
. Specifically, they suggest that the equity of a firm be considered a call option on the assets of a firm, with the debt being the strike price.
The opening section depicted the eerie stillness of that little town of Bethlehem with the underlying instruments
creating the astonishing texture of bells ringing far in the distance.
Additionally, treasurers want to "look under the hood" of money-market mutual funds to see the underlying instruments
and understand what the funds are invested in.
Fee cuts, transparency, revealing the underlying instruments
without giving away the 'secret formula' to copycats, due diligence, redemptions and selling pressures, less restrictions on investors and getting in new money are all topics that might change the face of the industry as we know it today, which might find itself adopting a new model.
It covered underlying instruments
involved in the international financial markets, the processes for efficient settlements and related basic financial calculations.
By connecting companies and events in news stories quickly and accurately with the underlying instruments
, we can provide a direct link between news and other financial information.
If derivatives are fairly valued, why not the underlying instruments
? Should all financial instruments be fairly valued?
Unlike many direct investors, portfolio investors often have relatively near-term horizons--that is, the future that concerns them is a relatively brief period of time--regardless of the maturity of the underlying instruments
. Unlike direct investors and traditional commercial bank lenders, they assume that they can liquidate their investments fairly quickly in well-developed trading markets.
Commission staff, she said, is assessing the adequacy of "investor disclosure, liquidity levels and transparency of underlying instruments
in which ETPs invest, fair valuations, efficiency in the arbitrage process and the relationship between market volatility and ETPs." Because of the "growth and innovation" in exchange-traded products, Rominger said, "the commission has been actively following, and continues to engage in the analysis of, these products."
If the underlying instruments
are government bonds, your money is safe, but if these are, say, a bond issued by a real estate firm, then the guarantee is as good as the firm's credit.
Market risk would be assessed on a portfolio basis, taking into account the cash flows associated with both derivatives and the underlying instruments