Related papers: Remark on repo and options
There exist several methods how more general options can be priced with call prices. In this article, we extend these results to cover a wider class of options and market models. In particular, we introduce a new pricing formula which can…
We derive new formulas for the price of the European call and put options in the Black-Scholes model, under the form of uniformly convergent series generalizing previously known approximations. We also provide precise boundaries for the…
The author presents alternatives to the Black-Scholes european call option pricing model by incorporating different transaction cost structures in the replicating strategy. In particular, an exponentially decreasing structure is proposed…
Option contracts can be valued by using the Black-Scholes equation, a partial differential equation with initial conditions. An exact solution for European style options is known. The computation time and the error need to be minimized…
In this work, we give a generalized formulation of the Black-Scholes model. The novelty resides in considering the Black-Scholes model to be valid on 'average', but such that the pointwise option price dynamics depends on a measure…
A new mathematical model for the Black-Scholes equation is proposed to forecast option prices. This model includes new interval for the price of the underlying stock as well as new initial and boundary conditions. Conventional notions of…
We reconsider the problem of option pricing using historical probability distributions. We first discuss how the risk-minimisation scheme proposed recently is an adequate starting point under the realistic assumption that price increments…
Our goal here is to discuss the pricing problem of European and American options in discrete time using elementary calculus so as to be an easy reference for first year undergraduate students. Using the binomial model we compute the fair…
We provide an European option pricing formula written in the form of an infinite series of Black Scholes type terms under double Levy jumps model, where both the interest rate and underlying price are driven by Levy process. The series…
We study the Option pricing with linear investment strategy based on discrete time trading of the underlying security, which unlike the existing continuous trading models provides a feasible real market implementation. Closed form formulas…
The Black-Scholes model (sometimes known as the Black-Scholes-Merton model) gives a theoretical estimate for the price of European options. The price evolution under this model is described by the Black-Scholes formula, one of the most…
In this article, we study the rate of convergence of prices when a model is approximated by some simplified model. We also provide a method how explicit error formula for more general options can be obtained if such formula is available for…
We study the pricing and hedging of European spread options on correlated assets when, in contrast to the standard framework and consistent with imperfect liquidity markets, the trading in the stock market has a direct impact on stocks…
The true probability of a European call option to achieve positive return is investigated under the Black-Scholes model. It is found that the probability is determined by those market factors appearing in the BS formula, besides the growth…
We derive the Black-Scholes-Merton dual equation, which has exactly the same form as the Black-Scholes-Merton equation. The novel and general equation works for options with a payoff of homogeneous of degree one, including European,…
In the framework of Black-Scholes-Merton model of financial derivatives, a path integral approach to option pricing is presented. A general formula to price European path dependent options on multidimensional assets is obtained and…
Option contracts can be valued by using the Black-Scholes equation, a partial differential equation with initial conditions. An exact solution for European style options is known. The computation time and the error need to be minimized…
In this paper is investigated the pricing problem of options on bonds with credit risk based on analysis on two kinds of solving problems for the Black-Scholes equations. First, a solution representation of the Black-Scholes equation with…
We derive a recursive formula for arithmetic Asian option prices with finite observation times in semimartingale models. The method is based on the relationship between the risk-neutral expectation of the quadratic variation of the return…
We show how the prices of options can be determined with the help of double-fractional differential equation in such a way that their inclusion in a portfolio of stocks provides a more reliable hedge against dramatic price drops that the…