问题描述：
麻烦各位高手,帮忙翻译一下
Out-of-the-money options: People particularly like the combination of a large potential payoff and limited risk and are willing to pay a premium for it. That is why they buy lottery tickets at prices that embody an expected loss.
Out-of-the-money options offer a similar payoff pattern. At the same time, the writers of those options are exposed to substanial risk because it is hard to hedge against large price changes. Why should we not expect out-of-the-money options to sell for a premium over fair value?
American options: The possibility of early exercise makes American options hard to value theoretically, especially because the early-exercise provision is seldom exercised optimally according to the theory. This is an enormous problem with mortgage-backed secure ties because of the homeowner's option to prepay the mortgage loan, but all American options share it to some extent. We should not be surprised if the market prices American options differently from their model values because of the uncertainty.
Embedded options: Valuation models treat a security with embedded option features, such as a callable bond or a security with default risk, as if it were simply the sum of a straight security and the option. But the market does not generally price things this way. For example, when coupon strippers unbundle government bonds, or when mortgage pass-throughs are repackaged into CMOs, the sum of the parts sells for more than the original whole. Why should we expect the market to price embedded options as if they could be traded separately when this is not true of other securities?
Times of crisis: The period around the crash of October 1987 showed that in times of financial crisis, arbitrage becomes even harder to do and option prices can be subject to tremendous pressures. At such times, we should not expect to be able to explain market prices well with an arbitrage-based valuation model.
Where Do We Go From Here?
If what is really wanted is a model to explain how the market prices options, it doesn’t make sense for academics and builders of option models to restrict their attention entirely to elaborating arbitrage-based valuation models in an ideal market. They should at least examine broader classes of theories that include factors such as expectations, risk aversion and market "imperfections" that do not enter arbitrage-based valuation models but do affect option demand and supply in the real world.
For those who would use theoretical models to trade actual options, it is safer to use models for hedging than for computing option values; furthermore, the harder the arbitrage is to do, the less confidence these investors can have that the model is going to give either the true option value or the market price. Hedging options with options, rather than with the underlying stock, can provide some defense against inaccurate volatility estimates and model misspecification.
Out-of-the-money options: People particularly like the combination of a large potential payoff and limited risk and are willing to pay a premium for it. That is why they buy lottery tickets at prices that embody an expected loss.
Out-of-the-money options offer a similar payoff pattern. At the same time, the writers of those options are exposed to substanial risk because it is hard to hedge against large price changes. Why should we not expect out-of-the-money options to sell for a premium over fair value?
American options: The possibility of early exercise makes American options hard to value theoretically, especially because the early-exercise provision is seldom exercised optimally according to the theory. This is an enormous problem with mortgage-backed secure ties because of the homeowner's option to prepay the mortgage loan, but all American options share it to some extent. We should not be surprised if the market prices American options differently from their model values because of the uncertainty.
Embedded options: Valuation models treat a security with embedded option features, such as a callable bond or a security with default risk, as if it were simply the sum of a straight security and the option. But the market does not generally price things this way. For example, when coupon strippers unbundle government bonds, or when mortgage pass-throughs are repackaged into CMOs, the sum of the parts sells for more than the original whole. Why should we expect the market to price embedded options as if they could be traded separately when this is not true of other securities?
Times of crisis: The period around the crash of October 1987 showed that in times of financial crisis, arbitrage becomes even harder to do and option prices can be subject to tremendous pressures. At such times, we should not expect to be able to explain market prices well with an arbitrage-based valuation model.
Where Do We Go From Here?
If what is really wanted is a model to explain how the market prices options, it doesn’t make sense for academics and builders of option models to restrict their attention entirely to elaborating arbitrage-based valuation models in an ideal market. They should at least examine broader classes of theories that include factors such as expectations, risk aversion and market "imperfections" that do not enter arbitrage-based valuation models but do affect option demand and supply in the real world.
For those who would use theoretical models to trade actual options, it is safer to use models for hedging than for computing option values; furthermore, the harder the arbitrage is to do, the less confidence these investors can have that the model is going to give either the true option value or the market price. Hedging options with options, rather than with the underlying stock, can provide some defense against inaccurate volatility estimates and model misspecification.
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