Microsoft Treasury - Director, Capital Markets
Computational Finance Seminar
Options give market participants a clearing price for risk. However, the future price of risk does not force anyone to lose money - both buyer and seller of an option can end the day with a profit. Consider a buy and hedge option holder compared to a sell and hold under choppy but range-bound markets, both market participants can make a profit. Credit conditions also have an impact on option sellers: The Japanese are still selling JPY vega overall, and this is causing a bit of an issue in the market because credit is becoming scarce. We have seen repeated examples of choice markets, stuck on names, and one situation where an inverted market existed. The run below includes a large amount of Japanese offers, which will likely disappear after fiscal half-year (end of September). The "real" offers are 0.1-0.15 higher. The talk will cover examples of financial risk management that highlight the broad array of dynamics in option markets, and how no single measure of risk is enforceable.
* Michael Morrow is Director of Capital Markets at Microsoft, with responsibility for corporate finance & capital structure, foreign exchange, fixed income and equity derivatives, and alternative investments. He has a 1993 Harvard undergraduate degree studying math and physics, then spent five years (1993-98) at the University of Washington Math Department. In 1996 he became distracted by financial mathematics, starting work at Microsoft in 1998. The past six years at Microsoft he has worked in every area of Treasury, including credit & collections, business risk management and the full spectrum of financial risk management.