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Financial Calculus by Martin Baxter, Andrew Rennie

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Appendix 4

Glossary of technical terms

 

 

 

Adapted    a process which depends only on the current position and past movements of the driving processes. It is unable to see into the future

American call option    a call option which can be exercised at any time up to the option expiry date

Arbitrage    the making of a guaranteed risk-free profit with a trade or series of trades in the market

Arbitrage free    a market which has no opportunities for risk-free profit

Arbitrage price    the only price for a security that allows no arbitrage opportunity

Autoregressive    of a process, that it is mean-reverting

Average    the arithmetic mean of a sample

Bank account process    an account which is continuously compounded at the prevailing instantaneous ...

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