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Revisited multi-moment approximate option pricing models: a general comparison (Part 1)
Jurczenko, Emmanuel; Maillet, Bertrand; Negrea, Bogdan - London School of Economics (LSE) - 2002
expansion to price options when the risk-neutral density is asymmetric and leptokurtic. Amongst them, one can distinguish the …
Persistent link: https://www.econbiz.de/10010745304
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Skewness and kurtosis implied by option prices: a second comment
Jurczenko, Emmanuel; Maillet, Bertrand; Negrea, Bogdan - London School of Economics (LSE) - 2002
Several authors have proposed series expansion methods to price options when the risk-neutral density is asymmetric and … sensitivities of option prices to shifts in skewness and kurtosis using parameter values from Corrado- Su (1996) and Brown …-Robinson (2002), and market data from the French options market. We show that di¤erences between the original, corrected, and our …
Persistent link: https://www.econbiz.de/10011071378
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A Monte Carlo Method using PDE Expansions for a Diversifed Equity Index Model
Heath, David; Platen, Eckhard - Finance Discipline Group, Business School - 2014
This paper considers a new class of Monte Carlo methods that are combined with PDE expansions for the pricing and hedging of derivative securities for multidimensional diffusion models. The proposed method combines the advantages of both PDE and Monte Carlo methods and can be directly applied to...
Persistent link: https://www.econbiz.de/10010888484
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Evaluating Incentive Options
Xiong, Wei; Sircar, Ronnie - Econometric Society - 2004
We provide an analytical and flexible framework to evaluate incentive options. Our model not only considers vesting … resetting to capture the fact that firms tend to grant more options after existing options are either exercised or become deep … out of the money. By treating the incentive option as a flow of barrier options, we are able to obtain a near …
Persistent link: https://www.econbiz.de/10005329033
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Three-Benchmarked Risk Minimization for Jump Diffusion Markets
Du, Ke; Platen, Eckhard - Finance Discipline Group, Business School - 2011
The paper discusses the problem of hedging not perfectly replicable contingent claims by using a benchmark, the numerraire portfolio, as reference unit. The proposed concept of benchmarked risk minimization generalizes classical risk minimization, pioneered by Follmer, Sondermann and Schweizer....
Persistent link: https://www.econbiz.de/10009357762
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Approximating the Numeraire Portfolio by Naive Diversification
Platen, Eckhard; Rendek, Renata - Finance Discipline Group, Business School - 2010
Estimation theory has shown, due to the limited estimation window available for real asset data, the sample based Markowitz mean-variance approach produces unreliable weights which fluctuate substantially over time. This paper proposes an alternate approach to portfolio optimization, being the...
Persistent link: https://www.econbiz.de/10008483767
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A Benchmark Approach to Finance
Platen, Eckhard - Finance Discipline Group, Business School - 2004
This paper derives a unified framework for portfolio optimization, derivative pricing, financial modeling and risk measurement. It is based on the natural assumption that investors prefer more or less, in the sense that the higher drift is preferred. Each such investor is shown to hold an...
Persistent link: https://www.econbiz.de/10004984454
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Fair Pricing of Weather Derivatives
Platen, Eckhard; West, Jason - Finance Discipline Group, Business School - 2003
This paper proposes a consistent benchmark approach to price weather derivatives. The growth optimal portfolio to price weather derivatives. The growth optimal portfolio is used as numeraire such that all benchmarked fair price processes are martingales. No measure transformation is needed for...
Persistent link: https://www.econbiz.de/10004984459
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Benchmark Pricing of Credit Derivatives Under a Standard Market Model
Craddock, Mark; Platen, Eckhard - Finance Discipline Group, Business School - 2001
. Furthermore, put and call options on an index are studied that measure the credit worthiness of a firm. …
Persistent link: https://www.econbiz.de/10004984460
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Pricing and Hedging for Incomplete Jump Diffusion Benchmark Models
Platen, Eckhard - Finance Discipline Group, Business School - 2003
This paper considers a class of incomplete financial market models with security price processes that exhibit intensity based jumps. The benchmark or numeraire is chosen to be the growth optimal portfolio. Portfolio values, when expressed in units of the benchmark, are local martingales. In...
Persistent link: https://www.econbiz.de/10004984464