financial mathematics. in finance, a hedge is an investment that is taken out specifically to reduce...
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Financial Mathematics
In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.
central limit theorem (CLT) states that the sum of a large number of independent and identically-distributed random variables will be approximately normally distributed (i.e., following a Gaussian distribution, or bell-shaped curve) if the random variables have a finite variance.
Call Option
http://en.wikipedia.org/wiki/Call_option
Put Option
http://en.wikipedia.org/wiki/Put_option
Lets look at some equity option markets
http://quote.morningstar.com/Option/Options.aspx?ticker=AAPL&sLevel=D
Black Scholes Pricing Option Formula
• http://en.wikipedia.org/wiki/Black-Scholes
Statistical Arbitrage
Pairs Trading
• http://en.wikipedia.org/wiki/Pairs_trade
• Ford and GM
• http://finance.google.com/finance?q=ford
Co-Integration
• Excel: Simple_Cointegration_Example.xls