Practical Option Valuations of Futures Contracts with Negative Underlying Prices
Mathematical Finance
2020-09-28 v1
Abstract
Here we propose two alternatives to Black 76 to value European option future contracts in which the underlying market prices can be negative or mean reverting. The two proposed models are Ornstein-Uhlenbeck (OU) and continuous time GARCH (generalized autoregressive conditionally heteroscedastic). We then analyse the values and compare them with Black 76, the most commonly used model, when the underlying market prices are positive
Keywords
Cite
@article{arxiv.2009.12350,
title = {Practical Option Valuations of Futures Contracts with Negative Underlying Prices},
author = {Anatoliy Swishchuk and Ana Roldan-Contreras and Elham Soufiani and Guillermo Martinez and Mohsen Seifi and Nishant Agrawal and Yao Yao},
journal= {arXiv preprint arXiv:2009.12350},
year = {2020}
}