Narrow Results

The first motivation of the creation of derivatives is hedging risk but unfortunately this motivation has changed over the decades since more conventional contracts are used for speculation. The purpose of this study is to use derivatives solely for hedging while respecting principles of profit and risk sharing. According to previous work about the pricing of Waad Bil Mourabaha and using the conventional expression of the contingent premium option, we will propose a model of Participating CPO.

In this chapter, we (i) use the decision-tree approach to derive binomial option pricing model (OPM) in terms of the method used by Rendleman and Barter (RB, 1979) and Cox et al. (CRR, 1979) and (ii) use Microsoft Excel to show how decision-tree model can be converted to Black–Scholes model when the number period increases to infinity. In addition, we develop binomial tree model for American option and trinomial tree model. The efficiency of binomial and trinomial tree methods is also compared. In sum, this chapter shows how binomial OPM can be converted step by step to Black–Scholes OPM.

The main purposes of this introduction chapter are (i) to give an overview of the following 109 papers, which discuss investment analysis, portfolio management, and financial derivatives; (ii) to classify these 109 chapters into nine topics; and (iii) to classify the keywords in terms of chapter numbers.

The main aims of this chapter are (i) to use the decision tree approach to derive binomial option pricing model (OPM) in terms of the method used by Rendleman and Barter (RB, 1979) and Cox, Ross, and Rubinstein (CRR, 1979) and (ii) to use Microsoft Excel to show how decision tree model can be converted to Black–Scholes model when the number period increases to infinity. In addition, we develop binomial tree model for American option and trinomial tree model. The efficiency between binomial and trinomial tree is also compared. In sum, this chapter shows how binomial OPM can be converted step by step to Black–Scholes OPM.