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Recent Advances in Numerical Methods for Pricing Derivative Securities

Broadie, Mark; Detemple, Jérôme B. - Centre Interuniversitaire de Recherche en Analyse des … - 1996

This paper provides a survey of recent numerical methods for pricing derivative securities. Methods for standard American options on a single underlying asset, barrier and lookback options and options on multiple assets are reviewed. Criteria for comparison of different approaches are discussed....

Persistent link: https://www.econbiz.de/10005100731

Non-Traded Asset Valuation with Portfolio Constraints: A Binomial Approach

Detemple, Jérôme B.; Sundaresan, Suresh - Centre Interuniversitaire de Recherche en Analyse des … - 1999

We provide a simple binomial framework to value American-style derivatives subject to trading restrictions. The optimal investment of liquid wealth is solved simultaneously with the early exercise decision of the non-traded derivative. No-short-sales constraints on the underlying asset manifest...

Persistent link: https://www.econbiz.de/10005100781

Pricing Discretely Monitored Barrier Options by a Markov Chain

Duan, Jin-Chuan; Dudley, Evan; Gauthier, Geneviève; … - Centre Interuniversitaire de Recherche en Analyse des … - 1999

We propose a Markov chain method for pricing discretely monitored barrier options in both the constant and time-varying volatility valuation frameworks. The method uses a time homogeneous Markov Chain to approximate the underlying asset price process. Our approach provides a natural framework...

Persistent link: https://www.econbiz.de/10005100792

The Valuation of Volatility Options

Detemple, Jérôme B.; Osakwe, Carlton - Centre Interuniversitaire de Recherche en Analyse des … - 1999

This paper examines the valuation of European- and American-style volatility options based on a general equilibrium stochastic volatility framework. Properties of the optimal exercise region and of the option price are provided when volatility follows a general diffusion process. Explicit...

Persistent link: https://www.econbiz.de/10005100856

American Options: Symmetry Properties

Detemple, Jérôme B. - Centre Interuniversitaire de Recherche en Analyse des … - 1999

A useful feature of European and American options in the standard financial market model with constant coefficients is the property of put-call symmetry. This property states that the value of a put option with strike price K and maturity date T is the same as the value of a call option with...

Persistent link: https://www.econbiz.de/10005100907

American Options on Dividend-Paying Assets

Broadie, Mark; Detemple, Jérôme B. - Centre Interuniversitaire de Recherche en Analyse des … - 1996

We provide a comprehensive treatment of option pricing with particular emphasis on the valuation of American options on dividend-paying essets. We begin by reviewing valuation principles for European contingent claims in a financial market in which the underlying asset price follows an Itô...

Persistent link: https://www.econbiz.de/10005101078

A Monte-Carlo Method for Optimal Portfolios

Detemple, Jérôme B.; Garcia, René; Rindisbacher, Marcel - Centre Interuniversitaire de Recherche en Analyse des … - 2000

the hedging components and (iii) an analysis of simulation-based numerical methods. The core of our approach relies on … closed form solutions for Melliavin derivatives of diffusion processes which simplify their numerical simulation and … facilitate the computation and simulation of the hedging components of optimal portfolios. One of our procedures relies on a …

Persistent link: https://www.econbiz.de/10005100643

Empirical Martingale Simulation for Asset Prices

Duan, Jin-Chuan; Simonato, Jean-Guy - Centre Interuniversitaire de Recherche en Analyse des … - 1995

This paper proposes a simple modification to the standard Monte Carlo simulation procedure for computing the prices of … price. This procedure is referred to as the empirical martingale simulation (EMS). The EMS ensures that the price estimated … by simulation satisfies rational option pricing bounds. The EMS also yields a substantial error reduction for the price …

Persistent link: https://www.econbiz.de/10005627153

If we can simulate it, we can insure it: An application to longevity risk management

Boyer, M. Martin; Stentoft, Lars Peter - Centre Interuniversitaire de Recherche en Analyse des … - 2012

This paper proposes a unified framework for measuring and managing longevity risk. Specifically, we develop a flexible framework for valuing survivor derivatives like forwards, swaps, as well as options both of European and American style. Our framework is essentially independent of the assumed...

Persistent link: https://www.econbiz.de/10011183731

An Empirical Analysis of Water Supply Contracts

Garcia, Serge; Thomas, Alban - Centre Interuniversitaire de Recherche en Analyse des … - 2002

We analyze the contract-based relationship between a local community and a private operator in charge of a water utility. An important feature of the regulation model is the existence of water network losses that may reduce the operator's cost. We derive solutions to the optimal contract both...

Persistent link: https://www.econbiz.de/10005627158