The theory tag has no wiki summary.
2
votes
2answers
356 views
Understanding the concepts of market maker and broker
Wikipedia says:
A market maker is a company, or an individual, that quotes both a buy
and a sell price in a financial instrument or commodity held in
inventory, hoping to make a profit on the ...
6
votes
2answers
443 views
Who creates money? Central banks or commercial banks?
Which of these is a better description of money creation:
Scenario 1: Central bank creates money
Customer A deposits $10 at his bank. Customer B wants to borrow $100. The bank is in good standing ...
1
vote
1answer
245 views
Deriving the put-call parity
I am looking at the proof of the put-call parity, $P+S=C+Ee^{-rT}$
The proof begins by defining two portfolios with same strike price $E$ and time to expiry $T$:
1. A call $C(E,T)$ plus cash ...
4
votes
1answer
260 views
Option Theta: What conditions are needed for Theta > P/N, where P = option price, and N = days to expiration?
The wikipedia definition for Theta is:
And people frequently refer to the picture below, to show what typically happens with an option's value as a function of time; we can note this is ...
8
votes
4answers
242 views
Why is a stock that pays a dividend preferrable to one that doesn't?
I understand that a dividend is a way for a company to return money to shareholders. But I'm not quite understanding why it is preferable to capital appreciation and putting the money to work ...
