Related papers: A CDS Option Miscellany
Swing options on the gas market are american style option where daily quantities exercices are constrained and global quantities exerciced each year constrained too. The option holder has to decide each day how much he consumes of the…
I explicitly work out closed form solutions for the optimal hedging strategies (in the sense of Bouchaud and Sornette) in the case of European call options, where the underlying is modeled by (unbiased) iid additive returns with Student-t…
Conditional Asian options are recent market innovations, which offer cheaper and long-dated alternatives to regular Asian options. In contrast with payoffs from regular Asian options which are based on average asset prices, the payoffs from…
Suppliers (including companies and individual prosumers) may wish to protect their private information when selling items they have in stock. A market is envisaged where private information can be protected through the use of differential…
G-expectation, as a sublinear expectation, provides a powerful framework for modeling uncertainty in financial markets. Motivated by the need for robust valuation under model uncertainty, this work develops a unified risk-neutral valuation…
Models to price long term loans in the securities lending business are developed. These longer horizon deals can be viewed as contracts with optionality embedded in them. This insight leads to the usage of established methods from…
In commodity and energy markets swing options allow the buyer to hedge against futures price fluctuations and to select its preferred delivery strategy within daily or periodic constraints, possibly fixed by observing quoted futures…
This paper mainly discusses the American option's hedging strategies via binomialmodel and the basic idea of pricing and hedging American option. Although the essential scheme of hedging is almost the same as European option, small…
We reconsider the valuation of barrier options by means of binomial trees from a "forward looking" prospective rather than the more conventional "backward induction" one used by standard approaches. This reformulation allows us to write…
We study insolvency cascades in an interbank system when banks are allowed to insure their loans with credit default swaps (CDS) sold by other banks. We show that, by properly shifting financial exposures from one institution to another, a…
In this research, we proposed a Mean Convection Finite Difference Method (MCFDM) for European options pricing. The Black-Scholes model, which describes the dynamics of a financial asset, was first transformed into a convection-diffusion…
A version of indifference valuation of a European call option is proposed that includes statistical regularities of nonstochastic randomness. Classical relations (forward contract value and Black-Scholes formula) are obtained as particular…
Straddle Option is a financial trading tool that explores volatility premiums in high-volatility markets without predicting price direction. Although deep reinforcement learning has emerged as a powerful approach to trading automation in…
We show that shortfall risks of American options in a sequence of multinomial approximations of the multidimensional Black--Scholes (BS) market converge to the corresponding quantities for similar American options in the multidimensional BS…
In the first quarter of 2006 Chicago Board Options Exchange (CBOE) introduced, as one of the listed products, options on its implied volatility index (VIX). This created the challenge of developing a pricing framework that can…
Through a long-period analysis of the inter-temporal relations between the French markets for credit default swaps (CDS), shares and bonds between 2001 and 2008, this article shows how a financial innovation like CDS could heighten…
This paper presents a multinomial method for option pricing when the underlying asset follows an exponential Variance Gamma process. The continuous time Variance Gamma process is approximated by a discrete time Markov chain with the same…
We present an adaptive approach for valuing the European call option on assets with stochastic volatility. The essential feature of the method is a reduction of uncertainty in latent volatility due to a Bayesian learning procedure. Starting…
The literature on volatility modelling and option pricing is a large and diverse area due to its importance and applications. This paper provides a review of the most significant volatility models and option pricing methods, beginning with…
We develop and test a fast and accurate semi-analytical formula for single-name default swaptions in the context of a shifted square root jump diffusion (SSRJD) default intensity model. The model can be calibrated to the CDS term structure…