publication . Preprint . 2000

A new Loan-Stock Financial Instrument

Morozovsky, Alexander; Narasimhan, Rajan; Kholodenko, Yuri;
Open Access English
  • Published: 30 Jun 2000
Abstract
A new financial instrument (a new kind of a loan) is introduced. The loan-stock instrument (LSI) combines fixed rate instruments (loans, etc.) with other financial instruments that have higher volatilities and returns (stocks, mutual funds, currencies, derivatives, options, etc.). This new loan depends on the value of underlying security (for example, stock) in such a way that when underlying security increases, the value of loan decreases and backwards. The procedure to create a risk free portfolio and a technique to fairly price the LSI is described. The philosophy behind this procedure is quite similar to the Black-Scholes formalism in option theory. Creation...
Subjects
free text keywords: Physics - General Physics
Related Organizations
Download from

1. J. C. Hull, Options, Futures, and Other Derivatives, Prentice Hall, NJ (1997).

2. Wilmott P. et al. Option Pricing: Mathematical Models and Computation, Oxford Financial Press, Oxford (1993).

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