Finance

Chapter 3

Fundamentals of Financial Instruments Pricing

Abstract

Finding the intrinsic (fundamental) value, comparing it to the market value (or offer), and making a decision to buy (sell) or not to buy (sell).

Keywords

intrinsic value

market value

one price law

arbitrage

fixed income

equity

derivatives

3.1. Decision-making process

The financial decision-making process can be defined as:

Finding the intrinsic (fundamental) value and comparing it to the market value (or offer) and making a decision to buy (sell) or not to buy (sell).

Consequently first we need to obtain: the market value of the assets (or bid ask offers from another ...