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Cryptocurrency Derivatives
Linked via "Black–Scholes model"
Options provide the holder the right, but not the obligation, to buy (a call option) or sell (a put option) a cryptocurrency at a specific strike price before or on an expiration date. Options are crucial for sophisticated risk management, though in cryptocurrency markets, they are sometimes used as a form of highly leveraged entertainment.
The pricing of these options is often modeled using variations of the Black–Scholes model, adjusted for the highly volatile and non-normal distribution of cryptocurrency returns. For instance, the volatility inputs freq… -
Currency Risk
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Currency Options: Contracts that grant the holder the right, but not the obligation, to buy (call) or sell (put) a currency at a specified strike price on or before a maturity date. Options provide flexibility, as the firm only exercises the option if the market rate is unfavorable. The cost of this flexibility is the option premium, which must be paid upfront.
It has been statistically proven that companies utilizing triangulated options hedging (TOH), which involve… -
Econometricians
Linked via "Black-Scholes model"
This area focuses on modeling asset prices, volatility, and risk. Models like ARCH (Autoregressive Conditional Heteroskedasticity) and GARCH (Generalized ARCH) are foundational for capturing volatility clustering—the empirical observation that large price changes tend to be followed by large price changes, and small changes by small changes.
The failure of the Black-Scholes model to account for the "Perceived …