Monthly Archives: April 2014

What are Option Greeks?

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 exampl...

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Yellen Concerned Fed Model Fails to Predict Price Moves

Federal Reserve Chair Janet Yellen is concerned that the standard models central banks use to forecast inflation may be broken. Behind her disquiet: the failure of the models to foresee the path of prices in the U.S. during the last recession and its aftermath and in Japan during its deflationary period from 1998 to 2012. U.S. inflation has been higher than the simulations suggested, while Japanese price declines proved more persistent. Yellen alluded to her concerns in a speech last week, ...

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Growth of solo businesses

  Is the growth in the number of solo businesses a good sign for the economy? The number of U.S. businesses without paid employees—mostly self-employed individuals with unincorporated businesses—rose 1.1% to 22.74 million in 2012, the latest data available, according to a new report by Census this week. “Non-employer” businesses have increased nearly 7% since dipping to 21.35 million in 2008, the first full year of the 2007-2009 recession. The new Census data jibe with repo...

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Pump Prices Help to Drive Inflation Outlook

  While we watch many indicators that might point to a future rise in inflation, the above chart depicts how consumers correlate near term inflation expectations with prices paid at the pump. According to Friday’s consumer sentiment survey put out by Thomson-Reuters and the University of Michigan, consumers think inflation will be 3.2% a year from now, little changed from expectation readings so far this year. (Consumers almost always think inflation is running higher than the gove...

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Endowment Wealth Management-Weekly Market Update as of April 25, 2014 by Prateek Mehrotra

Weekly Capital Market Highlights: Domestic stock prices were mixed this week. Equities were generally little changed on the week, with investors digesting earnings news and tensions in Ukraine. Earnings reports were generally positive, with certain technology companies posting better-than-expected results. However, markets were nervous about the massing of Russian troops on the Ukraine border. Global markets were mostly lower on the week. World markets slipped on the week as investors grew ca...

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