Editing Derivative (finance) (section)

===Options===
In [[finance]], an '''[[Option (finance)|option]]''' is a contract which gives the ''buyer'' (the owner) the right, but not the obligation, to buy or sell an underlying asset or [[financial instrument|instrument]] at a specified [[strike price]] on or before a specified [[expiration (options)|date]]. The ''seller'' has the corresponding obligation to fulfill the transaction{{snd}}that is to sell or buy{{snd}}if the buyer (owner) "exercises" the option. The buyer pays a premium to the seller for this right. An option that conveys to the owner the right to buy something at a certain price is a "[[call option]]"; an option that conveys the right of the owner to sell something at a certain price is a "[[put option]]". Both are commonly traded, but for clarity, the call option is more frequently discussed.
Options valuation is a topic of ongoing research in academic and practical finance. In basic terms, the value of an option is commonly decomposed into two parts:
* The first part is the "intrinsic value", defined as the difference between the market value of the underlying and the strike price of the given option.
* The second part is the "time value", which depends on a set of other factors which, through a multivariable, non-linear interrelationship, reflect the [[discounted]] [[expected value]] of that difference at expiration.

Although options valuation has been studied since the 19th century, the contemporary approach is based on the [[Black–Scholes model]], which was first published in 1973.<ref>{{cite journal |first=Eric |last=Benhamou |title=Options pre-Black Scholes |url=http://www.ericbenhamou.net/documents/Encyclo/Pre%20Black-Scholes.pdf |access-date=December 26, 2014 |archive-date=October 10, 2015 |archive-url=https://web.archive.org/web/20151010195626/http://www.ericbenhamou.net/documents/Encyclo/Pre%20Black-Scholes.pdf |url-status=usurped }}</ref>{{Unreliable source?|date=August 2013}}<ref>{{cite journal |last1 =Black |first1= Fischer |first2= Myron |last2=Scholes |year=1973 |title=The Pricing of Options and Corporate Liabilities |journal =[[Journal of Political Economy]] |volume=81 |issue=3 |pages=637–654 |jstor=1831029 |doi=10.1086/260062|s2cid= 154552078 }}</ref>

Options contracts have been known for many centuries. However, both trading activity and academic interest increased when, as from 1973, options were issued with standardized terms and traded through a guaranteed clearing house at the [[Chicago Board Options Exchange]]. Today, many options are created in a standardized form and traded through clearing houses on regulated [[Exchange (organized market)|options exchanges]], while other [[Over-the-counter (finance)|over-the-counter]] options are written as bilateral, customized contracts between a single buyer and seller, one or both of which may be a dealer or market-maker. Options are part of a larger class of financial instruments known as [[derivative products]] or simply derivatives.<ref name="hull"/><ref>{{Citation
|last1=Brealey
|first1=Richard A.
|author-link=Richard A. Brealey
|last2=Myers
|first2=Stewart
|author2-link=Stewart Myers
|title=Principles of Corporate Finance
|publisher=McGraw-Hill
|year=2003
|edition=7th
|id=Chapter 20
|title-link=Principles of Corporate Finance
}}</ref>