Introduction

You-lan Zhu, Xiaonan Wu, I-Liang Chern and Zhi-zhong Sun
Additional contact information
You-lan Zhu: University of North Carolina
Xiaonan Wu: Hong Kong Baptist University
I-Liang Chern: National Taiwan University
Zhi-zhong Sun: Southeast University

Chapter 1 in Derivative Securities and Difference Methods, 2013, pp 3-15 from Springer

Abstract: Abstract We first introduce some basic knowledge on stocks, bonds, foreign currencies, commodities, and indices, all of which are called assets in this book. Huge volumes of stocks are traded on the stock market every day, and the price of a stock changes all the time. Such a price is a typical random variable. As examples, the prices of the stocks issued by IBM and GE during the period 1990–2000 are plotted in Figs.1.1 and 1.2. Stocks are issued by corporations. A corporation like IBM, for example, is a business unit, which gets its capital through issuing stocks. A holder of a share of stock owns a fixed portion of the corporation. For example, if a corporation issues ten million shares of stock, then the holder of a share of stock owns 10−7 portion of the corporation. Stock prices, especially those of high technology stocks, have large volatilities. However, stocks usually have higher returns than bonds, which attracts people to buy them. Many corporations distribute a small amount of cash to its stockholders in proportion to the number of shares of stock held periodically.

Keywords: Interest Rate; Stock Price; Foreign Currency; Call Option; Future Contract (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1007/978-1-4614-7306-0_1

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