Patrick Boyle

These classes are all based on the book Trading and Pricing Financial Derivatives, available on Amazon at this link. https://amzn.to/2WIoAL0
Check out our website http://www.onfinance.org/

Follow Patrick on twitter here: https://twitter.com/PatrickEBoyle

The Black–Scholes or Black–Scholes–Merton model is a mathematical model for the dynamics of a financial market containing derivative investment instruments. From the partial differential equation in the model, known as the Black–Scholes equation, one can deduce the Black–Scholes formula, which gives a theoretical estimate of the price of European-style options and shows that the option has a unique price regardless of the risk of the security and its expected return. The formula led to a boom in options trading and is widely used, although often with adjustments and corrections, by options market participants.

Based on works previously developed by academics and practitioners, such as Louis Bachelier and Ed Thorp among others, Fischer Black and Myron Scholes demonstrated in the late 1960s that a dynamic revision of a portfolio removes the expected return of the security, thus inventing the risk neutral argument. After three years of efforts, the formula was published in 1973 in an article entitled "The Pricing of Options and Corporate Liabilities", in the Journal of Political Economy. Robert C. Merton was the first to publish a paper expanding the mathematical understanding of the options pricing model, and coined the term "Black–Scholes options pricing model". Merton and Scholes received the 1997 Nobel Memorial Prize in Economic Sciences for their work, the committee citing their discovery of the risk neutral dynamic revision as a breakthrough that separates the option from the risk of the underlying security. Although ineligible for the prize because of his death in 1995, Black was mentioned as a contributor by the Swedish Academy.

The key idea behind the model is to hedge the option by buying and selling the underlying asset in in line with its delta and, as a consequence, to eliminate risk. This type of hedging is called "dynamic delta hedging" and is the basis of more complicated hedging strategies such as those engaged in by investment banks and hedge funds.

The model's assumptions have been relaxed and generalized in many directions, leading to a plethora of models that are currently used in derivative pricing and risk management. It is the insights of the model, as exemplified in the Black–Scholes formula, that are frequently used by market participants, as distinguished from the actual prices. These insights include no-arbitrage bounds and risk-neutral pricing. Further, the Black–Scholes equation, a partial differential equation that governs the price of the option, enables pricing using numerical methods when an explicit formula is not possible.

The Black–Scholes formula has only one parameter that cannot be directly observed in the market: the average future volatility of the underlying asset, but this can be backed out from the price of other options.

In this video we learn about the model, the assumptions required for the model and about what goes in to it.

We also learn about Implied volatility and the VIX Index. The VIX Index is a calculation designed to produce a measure of constant, 30-day expected volatility of the U.S. stock market, derived from real-time, mid-quote prices of S&P 500® Index (SPXSM) call and put options. On a global basis, it is one of the most recognized measures of volatility -- widely reported by financial media and closely followed by a variety of market participants as a daily market indicator.

pricing options using black scholes merton

Subscribe so that you can see future videos on this topic,

Learn more about your ad choices. Visit megaphone.fm/adchoices

Get an exclusive 15% discount on Saily data plans! Use code BOYLE at checkout. Download Saily app or go to https://saily.com/boyle

For years, firms like MicroStrategy turned buying Bitcoin into a corporate cheat code—raising billions, pumping token prices, and fueling meme-driven hype. But the magic loop has snapped. In this video, we break down why the “infinite money glitch” stopped working, how leveraged ETFs magnified losses, and why even Michael Saylor is now hoarding dollars. From gamma trades to meme economics, this is the story of how hype capitalism hit a wall.

Zeke Faux on @GoodWorkMB : https://www.youtube.com/watch?v=exoNex2Yn5w

Patrick's Books:
Statistics For The Trading Floor: https://amzn.to/3eerLA0
Derivatives For The Trading Floor: https://amzn.to/3cjsyPF
Corporate Finance: https://amzn.to/3fn3rvC

Ways To Support The Channel
Patreon: https://www.patreon.com/PatrickBoyleOnFinance
Buy Me a Coffee: https://www.buymeacoffee.com/patrickboyle

Visit our website: https://www.onfinance.org
Follow Patrick on Twitter Here: https://bsky.app/profile/pboyle.bsky.social

Business Inquiries ➡️ [email protected]

Patrick Boyle On Finance Podcast:
Spotify: https://open.spotify.com/show/7uhrWlDvxzy9hLoW0EYf0b
Apple: https://podcasts.apple.com/us/podcast/patrick-boyle-on-finance/id1547740313
Google Podcasts: https://tinyurl.com/62862nve

Join this channel to support making this content:
https://www.youtube.com/channel/UCASM0cgfkJxQ1ICmRilfHLw/join

Learn more about your ad choices. Visit megaphone.fm/adchoices

Enjoy up to 50% off Ekster's Black Friday! Go to https://partner.ekster.com/pboyle and use code BOYLE at checkout to unlock further savings!

The Great Depression was the worst and deepest peacetime economic shock in the history of the industrialized world. It brought about profound social change and was a significant factor in the drift towards the Second World War.
The depth of suffering during the Depression years is hard for many of us to imagine today. More than 1 in five children in the city were suffering from malnutrition by 1932, and the Great Depression was only getting going at that point, it lasted seven more years.
So, why did events on Wall Street in 1929 reverberate around the world? Why did the depression last so long, and how did America and the rest of the world eventually dig themselves out of this financial hole?

Patrick's Books:
Statistics For The Trading Floor: https://amzn.to/3eerLA0
Derivatives For The Trading Floor: https://amzn.to/3cjsyPF
Corporate Finance: https://amzn.to/3fn3rvC

Ways To Support The Channel
Patreon: https://www.patreon.com/PatrickBoyleOnFinance
Buy Me a Coffee: https://www.buymeacoffee.com/patrickboyle

Visit our website: https://www.onfinance.org
Follow Patrick on Twitter Here: https://twitter.com/PatrickEBoyle

Additional Reading:
Milton Friedman on The Great Depression: https://amzn.to/4fvMYF6
The Great Depression by Robert S. McElvaine: https://amzn.to/40Szajt
Essays on The Great Depression by Ben Bernanke: https://amzn.to/40Szajt
Keynes letter: https://www.economicsnetwork.ac.uk/archive/keynes_persuasion/The_Economic_Consequences_of_Mr._Churchill.htm
The U.S. Economy in the 1920s: https://eh.net/encyclopedia/the-u-s-economy-in-the-1920s/
Britain In The Great Depression: https://moneyweek.com/economy/uk-economy/602525/britain-didnt-have-a-roaring-20s-it-had-a-roaring-30s-heres-why
Michael Pettis in The FT: https://www.ft.com/content/ec1b730b-0fbf-3a8c-896a-557c06f730cf
The photographers of the Great Depression - Dorothea Lange, Walker Evans, and Arthur Rothstein

Business Inquiries ➡️ [email protected]

Patrick Boyle On Finance Podcast:
Spotify: https://open.spotify.com/show/7uhrWlDvxzy9hLoW0EYf0b
Apple: https://podcasts.apple.com/us/podcast/patrick-boyle-on-finance/id1547740313
Google Podcasts: https://tinyurl.com/62862nve

Join this channel to support making this content:
https://www.youtube.com/channel/UCASM0cgfkJxQ1ICmRilfHLw/join

Learn more about your ad choices. Visit megaphone.fm/adchoices

Go to https://ground.news/pb to get up to 40% off unlimited access to stay fully informed. Subscribe through my link this month for 40% off unlimited access.

Donald Trump has promised to conduct “the largest deportation effort in American history,” no matter what it costs—but the price tag may be bigger than expected.

In today's video we look at a history of US border control and the economic costs of deporting more than six percent of the US workforce while the US workforce ages.

Patrick's Books:
Statistics For The Trading Floor: https://amzn.to/3eerLA0
Derivatives For The Trading Floor: https://amzn.to/3cjsyPF
Corporate Finance: https://amzn.to/3fn3rvC

Ways To Support The Channel
Patreon: https://www.patreon.com/PatrickBoyleOnFinance
Buy Me a Coffee: https://www.buymeacoffee.com/patrickboyle

Visit our website: https://www.onfinance.org
Follow Patrick on Twitter Here: https://bsky.app/profile/pboyle.bsky.social

Business Inquiries ➡️ [email protected]

Patrick Boyle On Finance Podcast:
Spotify: https://open.spotify.com/show/7uhrWlDvxzy9hLoW0EYf0b
Apple: https://podcasts.apple.com/us/podcast/patrick-boyle-on-finance/id1547740313

Links:
Chloe East - The Labor Market Effects of Immigration Enforcement: https://www.journals.uchicago.edu/doi/epdf/10.1086/721152
Chloe East - Unintended Consequences of Immigration Enforcement: https://jhr.uwpress.org/content/early/2022/05/02/jhr.0920-11197R1
Warwick McKibbin presentation: https://www.youtube.com/watch?v=QV3lxKYIDFE
What Will Mass Deportations Look Like: What Will Mass Deportations Look Like?
How many people did Obama, Biden and Trump actually deport? https://www.the-independent.com/news/world/americas/us-politics/trump-deportation-numbers-obama-biden-b2649257.html
Sarah O’Connor Article: https://www.ft.com/content/2bb60c40-efe1-48d1-9c9e-b9ff672ce349
Who is right about ‘Maganomics? https://www.ft.com/content/76ee5977-1f16-470b-86a5-400209aad5a3
What we know about unauthorized immigrants living in the U.S: https://www.pewresearch.org/short-reads/2024/07/22/what-we-know-about-unauthorized-immigrants-living-in-the-us/

Join this channel to support making this content:
https://www.youtube.com/channel/UCASM0cgfkJxQ1ICmRilfHLw/join

Learn more about your ad choices. Visit megaphone.fm/adchoices

These full length lectures are being provided for students who are unable to attend live university lectures due to the public health issues associated with Covid 19. I will return to my standard YouTube video format shortly.

Buy The Book Here: https://amzn.to/2Qdj9zu
Visit our website. www.onfinance.org
Follow Patrick on Twitter Here: https://twitter.com/PatrickEBoyle


Full two hour university lecture on forward rate agreements and swaps. In this lecture we learn about forward rate curves, FRA's and swaps. We learn about the plain vanilla swap, interest rate swaps, foreign exchange swaps, variance swaps and dividend swaps. We learn two methods for pricing swaps, how swaps are traded and how the law of comparative advantage applies to swaps. This is lecture seven of a ten lecture series on financial derivatives for Masters in Finance Students, recorded in 2020. The lecture is based on the book Trading and Pricing Financial Derivatives and is taught by Patrick Boyle

Learn more about your ad choices. Visit megaphone.fm/adchoices

Go to https://surfshark.com/boyle or use code BOYLE at checkout to get 4 extra months of Surfshark VPN!

In 2003, Ghislaine Maxwell compiled a 238-page leather-bound book for Jeffrey Epstein — filled with letters, sketches, poems, and photos from billionaires, politicians, scientists, and celebrities. This book was never meant to be public. But now, thanks to the House Oversight Committee, it’s part of the public record — and it’s worse than anyone expected.

We’ll also explore the deeper questions: Where did Epstein’s money come from? Why hasn’t the government followed the money? And what does this say about the two-tiered justice system in America?

This scandal isn’t just about Epstein. It’s about the system that made him possible.

Link to my original Epstein Video: https://youtu.be/CbJSgan4mfQ

Patrick's Books:
Statistics For The Trading Floor: https://amzn.to/3eerLA0
Derivatives For The Trading Floor: https://amzn.to/3cjsyPF
Corporate Finance: https://amzn.to/3fn3rvC

Ways To Support The Channel
Patreon: https://www.patreon.com/PatrickBoyleOnFinance
Buy Me a Coffee: https://www.buymeacoffee.com/patrickboyle

Visit our website: https://www.onfinance.org
Follow Patrick on Twitter Here: https://bsky.app/profile/pboyle.bsky.social

Business Inquiries ➡️ [email protected]

Patrick Boyle On Finance Podcast:
Spotify: https://open.spotify.com/show/7uhrWlDvxzy9hLoW0EYf0b
Apple: https://podcasts.apple.com/us/podcast/patrick-boyle-on-finance/id1547740313
Google Podcasts: https://tinyurl.com/62862nve

Join this channel to support making this content:
https://www.youtube.com/channel/UCASM0cgfkJxQ1ICmRilfHLw/join

Learn more about your ad choices. Visit megaphone.fm/adchoices

What are Financial Futures?
A futures contract is a legal agreement to buy or sell a particular asset at an agreed price at an agreed time in the future. Futures contracts are standardized for quality and quantity to facilitate trading on a futures exchange. The buyer of a futures contract is taking on the obligation to buy the underlying asset when the futures contract expires. The seller of the futures contract is taking on the obligation to provide the underlying asset at the expiration date.

These classes are all based on the book Trading and Pricing Financial Derivatives, available on Amazon at this link. https://amzn.to/2WIoAL0
Check out our website http://www.onfinance.org/

Follow Patrick on twitter here: https://twitter.com/PatrickEBoyle

Learn more about your ad choices. Visit megaphone.fm/adchoices

Warren Buffett’s Berkshire Hathaway slumps to $50bn loss, their largest quarterly loss ever. The stock market sell-off hurt investment holdings despite an uptick in operating profit.

Warren Buffett, one of history’s greatest investors, has not been immune to the rough recent market environment. Today's video is about Buffett's quarterly report Q1 2020 or 10-Q released May 2, 2020, and what it tells us about investing in these uncertain times.

Berkshire Class A shares were down around 19% YTD as of Friday afternoon May 1, 2020, off 16% over the past 12 months. The S&P 500 is down 3% over the same period.

The Berkshire Hathaway 2020 Annual Meeting goes live on the internet this afternoon. This video gives a preview of some of the topics likely to be discussed.

Buffett recently called oil volatility and the panic hitting markets a “big one-two punch.”

The COVID-19 pandemic will likely be the largest event in insurance-industry history because it affects both sides of the balance sheet. How will this affect Berkshire Hathaway?

Auto insurers, such as Berkshire’s Geico, have returned some premiums to consumers as driving decreases, which could translate into fewer accidents. The industry may also see potential claims from business interruptions, canceled events, and workers’ compensation claims.

The COVID-19 lockdown has not been kind to value portfolios, value stocks today are highly economically sensitive and levered. By contrast, growth stocks had limited leverage coming into this crisis and software-based business models better suited to the economy effectively closing.

Buffett highlighted that many of the biggest tech stocks in the S&P don’t really require capital.

Value often performs best coming out of a recession, and for that reason everyone wants to know when will Buffett start deploying Berkshire's 128 billion dollar cash position.

Charlie Munger told The Wall Street Journal last month that Berkshire would likely close some of its smaller holdings as a result of the pandemic but didn’t specify which specific businesses would be affected. Investors are eager to find out.

Berkshire sold off sizeable stakes in Delta Air Lines and Southwest Airlines as the coronavirus battered the travel industry.

Buffett has stated that he constantly seeks to buy businesses that meet three criteria.
1. First, they must earn good returns on the net tangible capital required in their operation.
2. Second, they must be run by able and honest managers.
3. Finally, they must be available at a sensible price.

When Warren Buffett, the Oracle of Omaha speaks, investors from around the world listen. If Warren Buffett has any words of comfort or warning for stock-market investors, they will hear them later today.

The Berkshire Hathaway Annual Meeting which last year drew over 40,000 attendees will be streamed live online at 3PM central time.

Buy Patrick's Book Here: https://amzn.to/2J2kF3A
Visit our website: http://onfinance.org
Follow Patrick on Twitter Here: https://twitter.com/PatrickEBoyle

Patreon Page: https://www.patreon.com/PatrickBoyleOnFinance

Learn more about your ad choices. Visit megaphone.fm/adchoices

These classes are all based on the book Trading and Pricing Financial Derivatives, available on Amazon at this link. https://amzn.to/2WIoAL0
Check out our website http://www.onfinance.org/

Follow Patrick on twitter here: https://twitter.com/PatrickEBoyle

If you're an options investor, you may have heard about "Greeks" but you may not know exactly what they are or what they can do for you. If so, watch this series of videos where Patrick Boyle explains what these Greek letters mean and how to use them to better understand the price of an option.

What can option Greeks do for you?
Using the Greeks, an options investor can make more informed decisions about which options to trade, and when to trade them. Consider some of the things Greeks may help you do:

Gauge the likelihood that an option you're considering will expire in the money (Delta).
Estimate how much the Delta will change when the stock price changes (Gamma).
Get a feel for how much value your option might lose each day as it approaches expiration (Theta).
Understand how sensitive an option might be to large price swings in the underlying stock (Vega).
Simulate the effect of interest rate changes on an option (Rho).
What are Greeks anyway?
Greeks, including Delta, Gamma, Theta, Vega and Rho, measure the different factors that affect the price of an option contract. They are calculated using a theoretical options pricing model (see How much is an option worth?).

Since there are a variety of market factors that can affect the price of an option in some way, assuming all other factors remain unchanged, we can use these pricing models to calculate the Greeks and determine the impact of each factor when its value changes. For example, if we know that an option typically moves less than the underlying stock, we can use Delta to determine how much it is expected to move when the stock moves $1. If we know that an option loses value over time, we can use Theta to approximate how much value it loses each day.

what is delta gamma theta vega in options

Learn more about your ad choices. Visit megaphone.fm/adchoices

In todays video we will learn about forward interest rates and a derivative called a forward rate agreement or FRA.

These classes are all based on the book Trading and Pricing Financial Derivatives, available on Amazon at this link. https://amzn.to/2WIoAL0
Check out our website http://www.onfinance.org/

Follow Patrick on twitter here: https://twitter.com/PatrickEBoyle

What are Forward Rates?

A forward rate is an interest rate implied for periods of time in the future by zero-coupon bonds. For example, the market implied yield on a three-month Treasury bill three months from now is a forward rate.

If we know what the three-month zero-coupon Treasury bill rate is and what the six-month zero-coupon Treasury bill rate is, we can back out what the market is implying as the yield on a three-month Treasury bill three months from now.

To calculate forward rates we just need the zero-coupon yield curve.

What are Forward Rate Agreements?

A forward rate agreement (FRA) is an over-the-counter agreement to borrow a fixed amount of money at a fixed interest rate at a specified future time period.

Banks and large corporations can use FRAs to hedge future interest rate exposures. The buyer hedges against the risk of rising interest rates, while the seller hedges against the risk of falling interest rates. Speculators can use FRAs to make bets on future changes in interest rates.

Rates in the future will usually be different from the implied rate at the time you entered into a forward-rate-agreement, giving rise to gains or losses on the agreed transaction.

What is an FRA?
An FRA is an abbreviated term for Forward Rate Agreement

Learn more about your ad choices. Visit megaphone.fm/adchoices