Advanced options pricing models and their role in determining the option's reward value and building the hedging portfolio - an applied study in the Iraqi banking sector

Abstract

Financial engineering is concerned with creating new financial tools and processes that contribute to addressing contemporary financial problems, and derivatives are one of the most important innovations in financial engineering (Tufano, 1996:326). The last quarter of it is within the framework of the so-called financial derivatives markets, and the volume of exchange in them has increased dramatically because it is a good way to manage risks, and derivatives gain importance in that they create new ways to understand, measure and manage financial risks, reduce costs for both exporters and investors, and raise returns to The aspect of distributing the set of financing and investment alternatives available to them, and “derivative” is generally defined as a financial contract whose value is determined from the value of the asset from which it was derived.