Related papers: Remark on repo and options
Options are financial instruments that depend on the underlying stock. We explain their non-Gaussian fluctuations using the nonextensive thermodynamics parameter $q$. A generalized form of the Black-Scholes (B-S) partial differential…
In this paper, we price American-style Parisian down-and-in call options under the Black-Scholes framework. Usually, pricing an American-style option is much more difficult than pricing its European-style counterpart because of the…
This paper discusses the connection between mathematical finance and statistical modelling which turns out to be more than a formal mathematical correspondence. We like to figure out how common results and notions in statistics and their…
This work studies the valuation of currency options in markets suffering from a financial crisis. We consider a European option where the underlying asset is a foreign currency. We assume that the value of the underlying asset is a…
American options are studied in a general discrete market in the presence of proportional transaction costs, modelled as bid-ask spreads. Pricing algorithms and constructions of hedging strategies, stopping times and martingale…
The objective of this paper is to introduce the theory of option pricing for markets with informed traders within the framework of dynamic asset pricing theory. We introduce new models for option pricing for informed traders in complete…
Closed form option pricing formulae explaining skew and smile are obtained within a parsimonious non-Gaussian framework. We extend the non-Gaussian option pricing model of L. Borland (Quantitative Finance, {\bf 2}, 415-431, 2002) to include…
This paper presents a new model for options pricing. The Black-Scholes-Merton (BSM) model plays an important role in financial options pricing. However, the BSM model assumes that the risk-free interest rate, volatility, and equity premium…
In this paper the valuation problem of a European call option in presence of both stochastic volatility and transaction costs is considered. In the limit of small transaction costs and fast mean reversion, an asymptotic expression for the…
A bubble is characterized by the presence of an underlying asset whose discounted price process is a strict local martingale under the pricing measure. In such markets, many standard results from option pricing theory do not hold, and in…
A model is proposed for Bitcoin prices that takes into account market attention. Market attention, modeled by a mean-reverting Cox-Ingersoll-Ross processes, affects the volatility of Bitcoin returns, with some delay. The model is affine and…
Options have provided a field of much study because of the complexity involved in pricing them. The Black-Scholes equations were developed to price options but they are only valid for European styled options. There is added complexity when…
A statistical decision problem is hidden in the core of option pricing. A simple form for the price C of a European call option is obtained via the minimum Bayes risk, R_B, of a 2-parameter estimation problem, thus justifying calling C…
In this paper, we study a game with positive or plus infinite expectation and determine the optimal proportion of investment for maximizing the limit expectation of growth rate per attempt. With this objective, we introduce a new pricing…
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…
In this paper we derive an effective equation for derivative pricing which accounts for the presence of virtual arbitrage opportunities and their elimination by the market. We model the arbitrage return by a stochastic process and find an…
Valuation and parity formulas for both European-style and American-style exchange options are presented in a general financial model allowing for jumps, possibility of default and "bubbles" in asset prices. The formulas are given via…
This paper presents a novel way to predict options price for one day in advance, utilizing the method of Quasi-Reversibility for solving the Black-Scholes equation. The Black-Scholes equation solved forwards in time with Tikhonov…
In this paper we extend Buchen's method to develop a new technique for pricing of some exotic options with several expiry dates(more than 3 expiry dates) using a concept of higher order binary option. At first we introduce the concept of…
Proof that under simple assumptions, such as constraints of Put-Call Parity, the probability measure for the valuation of a European option has the mean derived from the forward price which can, but does not have to be the risk-neutral one,…