High Return Investments

Moneyness

In finance, moneyness is a measure of the the degree to which an derivative
security is likely to have positive monetary value at its expiration. An
option is at-the-money if the strike of the option is the same, or about the
same, as the current price of the underlying on which the option is on. An
out-the-money option currently has no intrinsic value - e.g. a call option
is out-the-money if the strike is higher than the current underlying price.
An in-the-money option conversely does have intrinsic value. The strike of
an in-the-money call option is lower than the current underlying price.

For example suppose the current stock price of IBM is $100. A call or put
option struck at $100 is at-the-money. A call option struck at $80 is
in-the-money. A put option struck at $80 is out-the-money. Conversely a $120
strike call option is out of the money and a $120 strike put option is in
the money.

When working with the Black-Scholes model moneyness may be defined
quantitatively. If we define the moneyness as

     [ m = \frac{d_1+d_2}{2}]

where d1 and d2 are the standard Black-Scholes parameters then

     [ m = \frac{\frac{S}{K}+rT}{\sigma\sqrt t}]

This choice of parameterisation means that the moneyness is zero when the
forward/underlying price matches the strike after discounting at the
risk-free rate. Moneyness is measured in standard deviations from this
point, with a positive value meaning an in-the-money option and a negative
value meaning an out-the-money option.

Investment FreshNews:

G7 announces plan of action for finance crisis (AFP via Yahoo! News)
Fri, 10 Oct 2008 22:59:48 GMT
Group of Seven finance chiefs announced Friday a plan of action to fight a global crisis including the use of "all available tools" to support key institutions and prevent their failure.

GE profit drop as expected, finance unit a drag (Reuters via Yahoo! News)
Fri, 10 Oct 2008 16:25:54 GMT
General Electric Co reported a drop in quarterly profit that matched its recent warning to Wall Street, and the U.S. conglomerate said the global credit crunch and slumping economies would continue to take a toll on its hefty finance arm.

World finance chiefs grasp for solutions in firestorm (AFP via Yahoo! News)
Fri, 10 Oct 2008 15:20:46 GMT
Global finance chiefs gathered in Washington for crisis talks Friday in search of a solution to a growing financial firestorm as panic spread in global markets.

WTO chief calls meeting to discuss crisis impact on trade finance (AFP via Yahoo! News)
Fri, 10 Oct 2008 14:33:49 GMT
The World Trade Organisation chief on Friday invited heads of development and commercial banks to a meeting in Geneva next month to discuss the impact of the economic crisis on trade finance.

Trade finance booms amid global crisis (Washington Post)
Fri, 10 Oct 2008 12:37:02 GMT
GENEVA (Reuters) - Business is booming in the trade finance market as exporters and importers return to a tried and tested form of credit amid the chaos of the financial crisis, bankers in the sector say.

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