A new method to retrieve the risk-neutral probability measure from observed option prices is developed and a closed … financial returns. The expansion coefficients can be calibrated from observed option prices and can also be computed, for … the properties of the new option pricing model by calibrating it to both real-world and simulated option prices and find …

The price of a European option can be computed as the expected value of the payoff function under the risk … the option price, with important consequences for the hedging of variance, skewness, and kurtosis swaps …

Classical option pricing theories are usually built on the law of one price, neglecting the impact of market liquidity … term and skew structures of bid-ask spreads typically observed in option markets. We show how to implement such a …

industry innovations was the development of modern-day option valuation theory, which is reviewed in the second and third … their underling asset and with each other. The second group contains studies that evaluate option empirical performance of … option valuation models. The approaches used include investigating the in-sample properties of option values by examining …