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Summary: 1/97
Chapter 7. Derivatives markets.
Manual for SOA Exam FM/CAS Exam 2.
Chapter 7. Derivatives markets.
Section 7.8. Spreads.
c 2009. Miguel A. Arcones. All rights reserved.
Extract from:
"Arcones' Manual for the SOA Exam FM/CAS Exam 2,
Financial Mathematics. Fall 2009 Edition",
available at http://www.actexmadriver.com/
c 2009. Miguel A. Arcones. All rights reserved. Manual for SOA Exam FM/CAS Exam 2.
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Chapter 7. Derivatives markets. Section 7.8. Spreads.
Spreads
An option spread (or a vertical spread) is a combination of only
calls or only puts, in which some options are bought and some
others are sold. By buying/selling several call/puts we can create
portfolios useful for many different objectives. A ratio spread is a
combination of buying m calls at one strike price and selling n calls
at a different strike price.
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