The Art Of Modern Burlesque Drama Essay

The Art Of Modern Burlesque Drama Essay The meaning of burlesque has changed throughout its varied history; the earliest form of burlesque can be traced back to Chaucer and his story of Sir Thopas. This piece of writing had no rivals or predecessors at the time and the next form of burlesque was Shakespeare. The playwright John OKeefe is another early burlesque writer; his plays were light-hearted and mocked the upper classes, the operas and plays in a cheeky way. His plays were the foundation of the earliest burlesque shows in London. This form of burlesque is often confused with satire because of the use of humour however they are very different forms of entertainment. Satire is the schoolmaster attacking dishonesty with a whip, Burlesque is the rude boy attacking pomposity with a peashooter Unfortunately the original burlesque shows which were full of comedy and skits have died out; they were considered a very English form of entertainment as the English people were able to mock their upper classes without causing offence. In England burlesque continued to develop and with the introduction of the Music Halls in the 19th century the shows had a permanent home. It was when it went into the music halls that it changed format from a full length comedy play to a series of sketches. Unfortunately burlesque died out in England after the world wars. Simultaneously there was a form of burlesque evolving in America; the popularity dramatically increased in 1868 with the troupe the British Blondes. Their show included comedy sketches and parodies of plays performed by ladies in scanty costumes. By 1873 the parodies had disappeared and the show mainly comprised of dances and political satires. The modern image of burlesque started in the 1920s when the term became synonymous with the striptease. Carrie Finnell performed the first true striptease in 1917; she would take one garment off each night with the promise that she would take another item off in the next show. In this way she inspired the audience to come back to each show. In the 1920s the striptease became the main draw of the show with the variety acts and comedic performances that accompanied it seen as fillers. This view is still popular today. A major part of the modern burlesque show is the use of gimmicks, such as the giant props and over the top costumes; these gimmicks also have their roots in the burlesque shows of the 1920s. At that time there was a saying: Youve got to get a gimmick, if you want to get ahead The popularity of burlesque seems to be directly related with times of unrest and depression. Its popularity increased in the 1930s at the time of the depression, it rose again in the early millennium when the terrorism threat increased and it has become popular again with this latest recession. The main explanation for this is that in times of hardship people seek out cheap, sexy entertainment and burlesque fits this description. When burlesque returned to England it was in the form of the American variety shows with striptease. Historically the majority of burlesque performers are female; this is still the case although male performers are becoming more common. The modern female performers have a great respect for the performers of the past. Females become burlesque performers for a variety of reasons, for many women it is a way of expressing themselves in a way that they would never dream of doing in real life. Burlesque allows the performer to act out their own fantasies and embrace their sensuality. Many performers cite their desire to be a drag queen as the main reason for becoming involved in burlesque performance. When I started doing burlesque, I would tell people it was because I couldnt be a drag queen Many burlesque performances involve exaggerated femininity with the use of heavy make-up; false eyelashes and rhinestone covered costumes which are often associated with drag acts. The women who perform burlesque feel empowered on stage, they often feel like they are empowering the female audience by proudly displaying their body which doesnt necessarily conform to the medias idea of a desirable woman. Feeling sexy and powerful onstage and knowing that you are possibly Changing the way the world looks at you and others who look like you Is an incredibly rewarding by product of the burlesque experience Some female performers have negative experiences and there are some clubs which make the performer feel cheap and exploited by forcing them to expose more that they are comfortable with and to perform to please the male audiences. There are a lot of  ­burlesque clubs that are really oversexualized,  ­really horrible. And I think a lot of girls feel  ­pressured to strip. However these clubs are rare now but were more common in the early 1990s revival; unfortunately many people still hold this opinion of burlesque clubs. The comedy and variety sections of the show are overlooked by many people eager to criticise the whole movement. It is easy to assume that all burlesque performers are arrogant and natural exhibitionists; this is not the case for the majority of the performers and the amount of control they have over their acts gives them the confidence to perform. Like any woman, put me in the wrong light and its not good! I definitely have moments when I feel very hyper-aware of my body some of my stage positions could potentially be unflattering. So I do my own lighting. Being able to control the lighting of a show is a rare thing for a performer and unique to burlesque. The relationship between burlesque and feminism is a much discussed issue, the changing face of burlesque means some feminists are embracing it as a feminist movement and many performers feel they make a feminist statement when they perform. When looking into this it is important to understand the feminist point of view. To deny a womans sexuality is certainly to oppress her but to portray her as nothing but a sexual being is equally to oppress her This statement is undeniably true and some burlesque performers have felt exploited as sexual objects and nothing more; this is demonstrated in Laurie Pennys article in the Guardian. The feminist views on the burlesque striptease are very contradictory. Some feminists are completely against any form of sexual imagery or exhibitionism; Andrea Dworkin was outspoken in her views on sexual imagery. Women are reduced to sexually subordinate vile whores Many people consider the burlesque striptease as a form of subordination which only exists to entertain and fulfil the male fantasy. When arguing against this opinion it is important to acknowledge that the original performances did begin as a fulfilment of the male fantasy. When the burlesque girls began attracting male attention in the 1860s they were managed by men and therefore did not have much control over their acts. At that time the majority of the audience was male so the show was geared towards them. There is always going to be an aspect of the male fantasy in the performance because without it the whole movement would not have developed. The contrasting feminist opinion is that women are sexual beings and should be free to express their sexual desire and pleasures; there is a feminist movement which formed the Feminist Anti-Censorship Taskforce (FACT). This group has published essays that celebrate womens sexuality and have said: Yes, sexual abuse exists and, yes, some images do degrade, But this should not prevent women from being able to represent Their experience as sexual beings This statement is supportive of the burlesque performer as when they are performing they are expressing their sensuality. It is important to understand the difference between the burlesque striptease and stripping in strip clubs. Since they are both forms of stripping the boundaries are indistinct but there are definite differences. The strippers in a strip club will expose much more of their bodies and gyrate to please the audience; their performance changes and becomes more sexual with the tips they receive. A burlesque stripper has a routine, which has been rehearsed, and perfected, it does not alter with tips. A burlesque stripper will never take off all their clothes, their nipples and are never exposed and the performance is more about the tease and what the audience cannot see. A womans greatest asset is a mans imagination This quote was particularly true in the 1920s when many of the stripteases lasted fifteen minutes with the performer teasing the whole time. The acts are significantly shorter in the modern burlesque shows but the tease aspect has continued. Another important difference between strippers and burlesque performers is the costume. In burlesque the costumes are a huge attraction and add to the spectacle of the show. Many of the performers start in a corset; the attraction of the corset is that it emphasises the female form and adds to the exaggerated femininity of the performers. According to Michelle Baldwin a burlesque costume is designed to sparkle shine and flow in the spotlight they are therefore covered in beads, rhinestones and feathers. The more spectacular costumes will move and flow with the dancer so they are often made from a light fabric or covered in tassels. To add to the tease of the show the performers will wear several layers; the final layer consisting of decorated pasties and matching thong. In a strip club less emphasis is placed on the costume and more emphasis is placed on the condition of a dancers body and what men will find attractive. Its an unfortunate truth but the slimmer you are the more money you will make. You dont have to be fashion model skinny but you do have to be tight if you expect to make good money. I personally find that a combination of yoga and weight training is ideal for the kind of look that men like. The costumes in a strip club vary from club to club but a common costume is micro minis and Lycra. A major difference in the costumes of the burlesque performer and the stripper is that the majority of burlesque dancers customise and create their own costumes. They will buy a basic garment and attach the rhinestones and glitter themselves. The main reason for this is that a burlesque dancer will not make much money performing; they do it simply for the love of performing. The audiences of the new burlesque shows are different from the audiences of the early shows and strip shows s that it appeals to men and women. An important difference from earlier burlesque is that the audience is as likely to consist of women and gay men as the heterosexual men who comprised the traditional audience for such shows The new wave of burlesque epitomises the glamour of the past in a way that previous revivals didnt; this is one of the major attractions of the modern burlesque shows; the audience who attend many modern burlesque nights in clubs such as Volupte and The Pigalle Club are encouraged to dress up in vintage clothing. Another reason could be the amazing costumes and spectacle of the show as a whole. The female spectator also come to the show to see a woman who has the same body as them performing a striptease as it makes them feel better about themselves. It is so popular because the burlesque world embraces women off all shapes and sizes. Unfortunately there is a counterargument to this opinion; burlesques most famous face is Dita Von Teese. She has trained her waist to 16; visually she possesses every womanly attribute the media say is desirable; the small waist, porcelain skin and large breasts. She could be said to be consolidating the negative images constantly displayed to the publi c but in a different way to the emaciated models. However she is a strong public figure and her unique appearance encourages women to be individuals and express themselves to be happy. The increased number of female spectators could also be due to the messages behind the show; the performers bring current issues and politics into their shows and react on stage, one example of this is the show of the world famous *BOB*; in one of her shows she plays a voice over of every hurtful thing ever said to her and reacts to it in her performance. Images laced with humour are so much easier to ingest for a consuming public. The nature of the burlesque show means that the performers are able to express the issues they want to without worrying about what is appropriate. The question of whether burlesque can be feminist is complicated as there are so many different clubs that are managed in many different ways. It is difficult to ignore the feminist arguments about the negative objectification of women and some personal accounts do support them. Laurie Penny had a bad experience as a burlesque performer and was made to feel exploited and when Jacki Wilson was an audience member in a burlesque show she was left feeling vulnerable and unsettled. However there are a huge number of positive reactions when it comes to the performances. A lot of current performers believe they are feminist; they have this opinion because of the positive reaction from the female audience members; however a strong feminist would dispute this opinion citing that their objectification was negative. When fledgling performers are taught how to perform burlesque they are taught to enjoy their bodies and the spotlight and not how to please men. We were not taught to please men, we were taught to enjoy ourselves, to revel in our bodies, to enjoy our sexuality, the thrill of the tease and the sensation of being in the spotlight. This is a very significant quote as the thrill of the body and the tease is echoed by many performers. Another positive aspect of burlesque is that it doesnt discriminate against women who are curvy or short; the public are constantly bombarded with images of the size zero models, burlesque embraces all body types; the routines and lighting are all designed to make the performer feel comfortable in their own skin. This is a very important part of the movement as modern day women are made to feel inferior and ashamed of their bodies by exposure to the constant images of airbrushed, surgically enhanced models. Despite the passionate opinions of some feminists who believe burlesque to be a form of negative female objectification it is a mistake to view it in this way. Females are sexual beings should not be repressed or denied their freedom of expression; if they choose to express themselves by performing a striptease they should not be criticized. Burlesque performers are often wrongly associated with sex workers and prostitutes and there is a stigma attached to the name as a result of some of the seedy aspects of its past. Many critics of the movement have not witnessed a true burlesque performance and have a strong opinion that they are unwilling to change. A very clear example of this is seen in the interview conducted with Von Teese by Hannah Pool. Pool was very dismissive of burlesque stripping and would never set foot in a club as she felt the women who attended them let the side down. This is an incredibly narrow-minded and unacceptable argument; no one can criticize a movement so passionately without experiencing it first hand. Burlesque is growing in popularity; the glamour aspect of the movement is attracting a new audience who agree with the opinion that it is empowering. One of the major attractions is that the female audience members see a performer similar to themselves on stage. Unfortunately there are some clubs that are not respectful of their performers and make them feel exploited so there will always be people who oppose burlesque. However the true spirit of vintage burlesque is one that should not be opposed and should be enjoyed by men and women alike.

Anne Frank :: essays research papers

  Ã‚  Ã‚  Ã‚  Ã‚  Anne Frank was a Jewish girl who lived in Amsterdam during the time of the Holocaust. Her life is pretty normal. Her father is a successful buisness man, she has good grades, has a caring family, and is kinda popular. The problem is is that she does not have a real friend. Besides her cat, that she loves to death. Of course she has the girls that she hangs out with, but they don't confide in eachother. Therefor, she doesn't consider them her real friends. Then on her 13th birthday she recieves a diary in which she puts her thoughts into or confides in. She now calls this her friend. She even gives it a name. It is named Kitty.   Ã‚  Ã‚  Ã‚  Ã‚  Then she meats this 16 year old boy who calls himself Hello. They start to become close and tell eachother things. When all of a sudden her older sister Margot recieves a call-up by the German officers. Her family does not want her sent to a concentration camp, so they are forced into hiding. They run to her fathers office with the help of Miep and some other people that work for her father. The office is a three storie building, but the bottom floor is the only floor that is really used. Leaving the other 2 floors supposively for storrage. The Franks take the 2nd floor and they're friends, the van Daan's, have the 3rd floor. The van Daan's consist of Mr. van Daan, Mrs. van Daan, and Peter; their 16 year old son. Both families hardly get along with eachother and find eachother in quarrels quite often. Mrs. van Daan and Mrs. Frank do not get along. Anne and Mrs. van Daan do not get along. Also Anne and Margot are not the best of friends at times. And Peter is a whinner so he does not get along with hardly anyone. Anne feels that her father is the only one that understands her at all, and this really upsets her mother.   Ã‚  Ã‚  Ã‚  Ã‚  So the neighbors do not notice that they are there, they have to have dark cloth over the windows at all times, and can not even look outside. They can not have lights on at sertain times of the day, and most of all, they can not make noises exspeacilally at night.

How firmly was the Tsar in control of Russia before 1905? Essay

Russia was an Autocracy before 1905 and the Tsar was Nicholas 2nd. Many people dispute over whether he was in control or not, the main factors being: The Tsar’s leadership, Opposition to the Tsar, Social and Economic conditions and finally means of control. It can be argued that some factors are more important than others, but they are all significant in how I believe the Tsar was losing control. The Tsar’s flaws as a leader were an extremely important reason as to why he was losing control of his country. Russia was an autocracy- this meant that the Tsar had full control of the country and had the final say in every decision. This could have been positive, but I think it was a negative thing. He was not a very decisive person, and he would not delegate to others (An example of this being, how he interfered in the appointments of local midwives.) While he was busy doing the wrong jobs he needed employees that were capable of the best. Another flaw of Nicholas’ was that he was extremely suspicious of those cleverer than him and fired many of his best workers (Count Witte) and preferred to hire only family and friends. This helped to weaken his control on Russia because not only did he lose respect from his people, but also he was not doing his job and as the only ruler of the country, Russia did not have a focused authority figure. The Tsar had a lot of opponents within Russia and he did not deal with them to the best of his abilities. This meant he was not firmly in control of Russia at all. The 4 main opposing groups were: The Liberals (Cadets), The Social Revolutionaries (SRs) and The Social Democratic Party (Bolsheviks and the Mensheviks) Although the different groups were all angry at different things, the one thing they had in common was that they were all unhappy about Russia’s Social and Economic Situation. In my opinion the Bolsheviks were the most dangerous group towards Tsar and the government, followed by the SRs then the Mensheviks finally the Liberals. Even though the Liberals had the most supporters, they were a peaceful group; they were not doing any damage to Russia. The Tsar did not believe they were a threat so chose to ignore them. However with the Bolsheviks they had a huge following (the working class.) Their approach to change was violence as was the SRs. The SRs managed to get close enough to the government to kill 2 of their officials. The Tsar dealt with the Bolsheviks and the SRs by killing them or exiling them. By exiling them he showed a lot of inexperience with how he dealt with these groups .All he did was send them away; this did not stop them from coming back! Siberia is in the east of the country (the opposite side as to where the Tsar was), but it is also a desert. This meant that the people the Tsar exiled became resentful towards him, as they had to live in a desert. An advantage to being exiled was that it was in the middle of nowhere. The organisations could discuss ideas and produce plans of future rebellions without the Tsar knowing what was going on. By not knowing this he lost an element of control because he did not know what his most violent organisations were doing. Every group in the Feudal system (except the aristocrats) had an organisation to rival the Tsar. This was bad because that meant at the very least only 1.5% of the population (aristocrats) were in full support of him. By not having the full support of his people the Tsar lost a lot of control because as a leader your people need to respect you but also have faith that you will do the right thing for the country in general (not just a specific group.) The monarchy was mostly made up of aristocrats, so was the government and army officials. By having only aristocrats in important positions the Tsar was not being fair, the 80% of the population that were peasants had a lot of reasons to despise the Tsar. This further allowed his control on Russia to loosen, it lost him support of people and the public started to realise that the Tsar was not the leader they needed to help them receive a better way of living. They needed someone that was not desperate for the power and someone who could hold control. Finally the fact the organizations even existed meant that he had lost some control already. If people respected him they would no t have started oppositions and formed plans. The groups all had plans. Whether they would work or not was a different issue. His weak leadership meant that he would not let anyone help him, he had resorted to last attempts by exiling people and had become desperate this shows how out of control he was and he knew it, because no one helped him he did not have a well thought out plan as to how to deal with the groups. The social and economic conditions in Russia would have made it hard for any leader to keep control, never mind the Tsar (a poor leader who had a lot of opposition.) 80% of Russia were peasants where as the aristocracy who owned 25% of the land and were only 1.5% of the population. This suggests that the gap between the rich and the poor was extreme. As the number of peasants moving to the city increased, more and more people started to realise how big this gap truly was and did not like it. Having to walk past lavish mansions on their way home, to rooms they probably shared with at least 1 other family created tension between the two social groups. The rich were getting richer and the poor poorer and nobody could move up the system. To make matters worse Russia spans 12 time zones and 60% of the population did not speak Russian. The Tsar lived in the far west so if a problem occurred in the east he would not be able to deal with it for days which meant his control of the situation decreased. If only 40% of you population speaks the national language it makes it harder for internal communication. The laws in Russia may have been harder to understand and those who did not speak the Tsar’s language would not have been as easy to control. The Tsar did not have as much domination as he thought he did because he could not control what was happening with some of the people and circumstances in the other end of his country. The Tsar used a lot of resources to try and keep his people under control, but to me it became apparent that the more resources he used the more the people refused to submit to his rules. One of his many means of control was the religious persecution of the Jews. All throughout history dictators have used specific groups of people (mostly the Jews) as scapegoats. Trying to pass the blame of the country onto someone else showed that the Tsar feared he would lose all of his control over the people if they thought it was his entire fault. Other means of control the Tsar used were: Secret police, regular police, prisons, and the army. In Leo Tolstoy’s letter to the Tsar in 1902 he says, â€Å"The numbers of regular police and of the secret police are continually growing.† This shows that the Tsar had started these policies but they were not working. People refused to be led by a man that was not objective to all groups in society and did not have the leadership required to be a successful Tsar. Overall I think that in the long-term it weakens his control but in the short term in strengthens his control. Showing the force he has the power to use might scare some of the population into behaving (but not for very long, I think they will see right through him.) However, having to rely on force (only at the point of a gun) shows his concern of the control he has over his country. The fact that the severity of the situation ended in armed forces patrolling the people, carrying live ammunition also shows his concern and ever shrinking clasp of control. After reviewing all of the evidence I believe that the Tsar was not in control of Russia before 1905. The Tsar’s poor qualities as a leader lost him respect from the people, as did the organizations opposing him. His desperation showed a lot in the decisions he made. If you are in control you are not desperate, you believe in the decisions you make, and the Tsar did not. Almost all of his forms of control failed in the long-term. The opposing groups managed to create plans and had a substantial number of followers. The social and economic situation made it ever harder to control Russia and his flaws isolated him from help and minimized the 1.5% of people that believed in him. The strongest evidence in my opinion is the opposition to the Tsar. All of the other facts contributed to the main point that he had opposition. If a leader has friction between him and his people he will always struggle to have control but the Tsar just had to many recurring problems to have control.

Capital Asset Pricing Model Essay Example Pdf - Free Essay Example

Sample details Pages: 9 Words: 2841 Downloads: 10 Date added: 2017/06/26 Category Finance Essay Type Argumentative essay Level High school Did you like this example? The capital asset pricing model provides an equation for determing the return on a stock. It states that the expected (average) excess return on a stock depends on the expected excess market return according to the following relationship. In the formulation, the estimated beta can be obtained from a time series regression of the stocks excess return on the excess market return. Don’t waste time! Our writers will create an original "Capital Asset Pricing Model Essay Example Pdf" essay for you Create order The risk of a stock and hence the average return on that stock should depend on the volatility of its return and not on this peculiar variable beta which the higher the stocks own volatility, the higher should be the average return on the stock. So the relative average returns on two stocks should depend on the ratios of their return volatilities and not the ratio of their betas. The key factors in determing portfolio variance are the covariances between all of the stock returns in the portfolios- the higher the average covariance of stock returns in the portfolio, the higher is portfolio variance. The CAPM assumes that all investors hold the market portfolio and then seeks to determine what the expected return should be on each of these individual stocks, in order that investors as a group are willing to hold these stocks. As we have seen, a key determinant of the return required by investors is the covariance between an individual stocks return and the market return- which is measured by the stocks beta. The stocks own return variance plays little or no part in determing the average return on the stock, as the risk can be diversified away as well as the CAPM can be in a well- diversified portfolio and does not add any additional world. So we can say the CAPM formulation contains no reference to the variance of returns on individual securities. CAPM uses a single factor, beta, to compare a portfolio with the market as a whole. But more generally, you can add factors to a regression model to give a better r-squared fit. The best known approach like this is the three factor model developed by Gene Fama and Ken French. Fama and French started with the observation that two classes of stocks have tended to do better than the market as a whole: (i) small caps and (ii) stocks with a high book-value-to-price ratio (customarily called value stocks; their opposites are called growth stocks). They then added two factors to CAPM to reflect a portfolios exposur e to these two classes: r       Rf    =    beta3 x (Km Rf )    +    bs x SMB    +    bv x HML    +    alpha Here r is the portfolios return rate, Rf is the risk-free return rate, and Km is the return of the whole stock market. The three factor beta is analogous to the classical beta but not equal to it, since there are now two additional factors to do some of the work. SMB and HML stand for small [cap] minus big and high [book/price] minus low; they measure the historic excess returns of small caps and value stocks over the market as a whole. By the way SMB is defined, the corresponding coefficients bs and bv take values on a scale of roughly 0 to 1: bs = 1 would be a small cap portfolio, bs = 0 would be large cap, bv = 1 would be a portfolio with a high book/price ratio. One thing thats interesting is that Fama and French still see high returns as a reward for taking on high risk; in particular that me ans that if returns increase with book/price, then stocks with a high book/price ratio must be more risky than average exactly the opposite of what a traditional business analyst would tell you. The difference comes from whether you believe in the efficient market theory. The business analyst doesnt believe it, so he would say high book/price indicates a buying opportunity: the stock looks cheap. 4. (a) Using financial market examples, explain the differences between speculation, hedging and arbitridge. Speculation Buying shares in the hope that the price will rise in the future or selling a share and hope to buy it back at a lower price in the future are forms of speculation. Any marketable financial assets can provide a vehicle for speculation including bonds, foreign currency, futures and options. Speculator activity is never like we shall see; they provide funds to enable hedging activities to take place. For examples, stock market bubbles such as the property markets collapse in Asian crisis and so on. Arbitrage An arbitrage opportunity takes advantage of price difference in different markets. It is basically buying in one market and at same time selling in another to get profit from the difference, like in UK, you can buy a toy doll for 10 pounds, and then sell it in German for 25 pounds, and the 15 pounds is the arbitrage profit. In the stock market, traders often try to exploit arbitrage opportunities. E.g. a trader may buy a stock on the foreign exchange where the price has not yet adjusted for the constantly fluctuating exchange rate. The price of stock on the foreign exchange is therefore undervalued compare to the price on the local exchange and the trader makes a profit from this difference. Hedge funds Hedge fund is one of techniques of active portfolio management which is usually using highly leveraged transactions to finance their investment. In other word, hedge funds by using derivatives to increase their exposure at a low cost. Just because of this leverage, hedge funds can always acquire the high return through invested their own capital; therefore it is more risky than other normal strategy. In instance, purchase a financial instrument in order to insure against possible reduction in wealth caused by the adverse price fluctuations. (b) Explain there types of financial market anomalies and discuss the implications of this evidence for the efficiency market hypothesis. There are three different type of anomalies: Weekend effect It is referring to the fact that there appears to be a systematic fall in stock prices between the Friday closing and Monday opening of the stock market. Because the governments release good news between Monday and Friday, but they wait until the weekend to release the bad news. The bad news is then reflected in low stock prices on Monday. Over- reaction to news If the good news appears to market, therefore the price of the stock will rise very high; in contrast of bad news, the price will drop down in to a certain level. Over time, market will correct this mispricing and prices return to fundamental values. If the news is true, past winner do badly in the future and past loser do well portfolios, it is also had lower risk. International diversification Theory suggests that portfolios should be diversified internationally to reduce the potential risk. In fact, investors tend to hold a disproportionally large proportion of stock market investment in their domestic market (home country bias). Because might they prefer something familiar and easy to acquire the correct information. Even in their domestic equity holdings, investors are biased towards holding local companies. 5. (a) Explian the payoff structures of call and put option options. Call and put option positions A put option (sometimes simply called a put) is a financial contract between two parties, the seller (writer) and the buyer of the option. The buyer acquires a short position with the right, but not the obligation, to sell the underlying instrument at an agreed-upon price (the strike price). If the buyer exercises his right to sell the option, the seller is obliged to buy it at the strike price. In exchange for having this option, the buyer pays the writer a fee (the option premium). The terms for exercising the options right to sell it differs depending on option style. A European put option allows the holder to exercise the put option for a short period of time right before expiration, while an American put option allows exercise at any time before expiration. The most widely-traded put options are equity, but they are traded on many other instruments such as interest rate. The put buyer either believes that the underlying assets price will fall by the exercise date or hopes to protect a long position in it. The advantage of buying a put over short selling the asset is that the option owners risk of loss is limited to the premium paid for it, whereas the asset short sellers risk of loss is unlimited (its price can rise greatly, theoretically, infinitely, all the short sellers loss. The put buyers prospect (risk) of gain is limited to the options strike price less the underlings spot price and the premium/fee paid for it. The put writer believes that the underlying securitys price will rise, not fall. The writer sells the put to collect the premium. The put writers total potential loss is limited to the puts strike price less the spot and premium already received. Puts can be used also to limit the writers portfolio risk and may be part of an option spread. A call option is a financial contract between two parties, the buyer and the seller of this type of option. It is the option to buy shares of stock at a specified time in the future. Often it is simply labeled a call. The buyer of the option has the right, but not the obligation to buy an agreed quantity of a particular commodity or financial instrument (the underlying instrument) from the seller of the option at a certain time (the expiration date) for a certain price (the strike price). The seller (or writer) is obligated to sell the commodity or financial instrument should the buyer so decide. The buyer pays a fee (called a premium) for this ri ght. The buyer of a call option wants the price of the underlying instrument to rise in the future; the seller either expects that it will not, or is willing to give up some of the upside (profit) from a price rise in return for the premium (paid immediately) and retaining the opportunity to make a gain up to the strike price (see below for examples). Call options are most profitable for the buyer when the underlying instrument is moving up, making the price of the underlying instrument closer to the strike price. The call buyer believes its likely the price of the underlying asset will rise by the exercise date. The risk is limited to the premium. The profit for the buyer can be very large, and is limited by how high underlings spot rises. When the price of the underlying instrument surpasses the strike price, the option is said to be in the money. The call writer does not believe the price of the underlying security is likely to rise. The writer sells the call to collect the premium. The total loss, for the call writer, can be very large, and is only limited by how high the underlings spot price rises. The initial transaction in this context (buying/selling a call option) is not the supplying of a physical or financial asset (the underlying instrument). Rather it is the granting of the right to buy the underlying asset, in exchange for a fee the option price or premium. Exact specifications may differ depending on option style. A European call option allows the holder to exercise the option (i.e., to buy) only on the option expiration date. An American call option allows exercise at any time during the life of the option. Call options can be purchased on many financial instruments other than stock in a corporation. Options can be purchased on futures on interest rates, for example (see interest rate cap), and on commodities like gold or crude oil. A tradable call option should not be confused with either Incentive stock options or with a w arrant. An incentive stock option, the option to buy stock in a particular company, is a right granted by a corporation to a particular person (typically executives) to purchase treasury stock. When an incentive stock option is exercised, new shares are issued. Incentive stock options are not traded on the open market. In contrast, when a call option is exercised, the underlying asset is transferred from one owner to another. (b) Analyses binominal option valuation by comparing the approaches using 1.implied probabilities and 2.no arbitrage conditions. Many investment decisions have to be made under uncertainty. In order to quantify this uncertainty, we can use probability distributions. This enables us to say whether a particular event or will not occur with a certain frequency. The idea of random events and probabilities is fairly well understood for simple problems. For example, binomial probability if its outcomes can be broken down into two probabilities p and q, where p and q are complementary (i.e. p + q = 1) For example, tossing a coin can be either heads or tails, each which have a (theoretical) probability of 0.5. Rolling a four on a six-sided die can be expressed as the probability (1/6) of getting a 4 or the probability (5/6) of rolling something else. No Arbitrage Approach There are three steps for this approach: Compute the option payoff in the two states of nature; construct a portfolio of stock and the risk-free asset which replicates these payoffs; price the option as equal to the cost of constructing the replicating portfolio. General approach to step (ii) Stock price (underlying asset) process: The current price is S, and in the next time period the price can increase to Su or decrease to Sd If the stock price increases to Su, the option payoff will be Ku. If the stock price decreases to Sd, the option payoff will be Kd. The replicating portfolio consists of ÃÆ'Ã… ½Ãƒâ€šÃ‚ » units of stock and ÃÆ'Ã… ½Ãƒâ€šÃ‚ ¼ is the amount invested at the The payoff on the replicating portfolio must equal the payoff on the option under both possible outcomes of the binomial process. This is expressed as follows: ÃÆ'Ã… ½Ãƒâ€šÃ‚ » Su + ÃÆ'Ã… ½Ãƒâ€šÃ‚ ¼ er = Ku (Equation 1) ÃÆ'Ã… ½Ãƒâ€šÃ‚ » Sd + ÃÆ'Ã… ½Ãƒâ€šÃ‚ ¼ er = Kd (Equation 2) We have two equations and two unknown values (ÃÆ'Ã… ½Ãƒâ€šÃ‚ » and ÃÆ'Ã… ½Ãƒâ€šÃ‚ ¼) Solving as simultaneous equations produces: ÃÆ'Ã… ½Ãƒâ€šÃ‚ » = (Ku Kd) / (Su Sd) ÃÆ'Ã… ½Ãƒâ€šÃ‚ ¼ = e-r [Ku {Su x (Ku Kd) / (Su Sd)}] In step 3 of the pricing approach: Option price = Cost of replicating portfolio = ÃÆ'Ã… ½Ãƒâ€šÃ‚ » S + ÃÆ'Ã… ½Ãƒâ€šÃ‚ ¼ 6. (a) Explain the covered interest rate parity conditions and demonstrate its relevance to the pricing of the currency forwards. The price of forward contract involved a relationship between the forward rate and three other variables, the sport rate and the money-market interest rates in the two countries, and is known as covered interest parity. We shall see in that in an efficient market, the quoted forward rate ensures that no risk-free arbitrage profits can be made by transacting betwe en the spot currency market, the two money markets and the forward market. The relationship between spot and forward rates can be derived as follows. Assume that a UK corporate treasure has a sum of money A pound, which he can invest in the UK or US for one year. We assume that the transaction must have zero market risk and we also assume zero credit risk. For the UK treasurer to be indifferent as to where the money is invested, it has to be the case that the risk-free return from investing in the UK equals return in sterling from the investing in the US. Assume that the quote interest rates in the domestic money market, the foreign money market and the exchange rates. In this case, the forward rate and the spot rate are measured as domestic per unit of foreign currency, therefore it shows that the investment equal in the one country which involve no market risk and then the corporate treasurer will be indifferent to placing his funds in either the US or the UK-this is called covered interest parity. (b) Explain the structures and characteristics of a fixed- for-floating interesting rate swap. There is one reason for entering in to a swap is to remove interest -rate risk over many future years, another one for undertaking a swap is that some firms find it cheaper to borrow at floating rated and then use a swap to create the fix-rate payments that they really want. It is sometimes cheaper to do this than to go and directly obtain a fixed-rate loan from your usual bank. For example, suppose that firm A finds it relatively cheap to borrow at a floating rate but would prefer to ultimately borrow at a fixed rate. Firm A does not go directly and borrow at a fixed rate from its corresponding bank, because its fixed-rate loans are relatively expensive. Instead, it borrows cheaply at a floating rate from another bank and enters in to swap where it pays floating rate and receives fixed rate. If the swap route is cheaper than directly going to the usual ba nk for a fixed-rate loan, the cost saving is known as the comparative advantage in the swap. This cost provides the financial incentive behind the expansion of the swap business.