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Pricing and Hedging Derivative Securities in Incomplete Markets : An E-Aritrage Model

Bertsimas, Dimitris - 1997

Given a European derivative security with an arbitrary payoff function and a corresponding set of" underlying … securities on which the derivative security is based, we solve the dynamic replication problem: find a" self-financing dynamic …

Persistent link: https://www.econbiz.de/10012472561

A Nonparametric Approach to Pricing and Hedging Derivative Securities Via Learning Networks

Hutchinson, James M. - 1994

We propose a nonparametric method for estimating the pricing formula of a derivative asset using learning networks … the practical relevance of our network pricing approach, we apply it to the pricing and delta-hedging of S&P 500 futures …

Persistent link: https://www.econbiz.de/10012474210

Unspanned Stochastic Volatility and the Pricing of Commodity Derivatives

Trolle, Anders B. - 2006

We conduct a comprehensive analysis of unspanned stochastic volatility in commodity markets in general and the crude-oil market in particular. We present model-free results that strongly suggest the presence of unspanned stochastic volatility in the crude-oil market. We then develop a tractable...

Persistent link: https://www.econbiz.de/10012465916

Heterogeneous-Expectations Model of the Value of Bonds Bearing Call Options

Bodie, Zvi - 1977

This paper develops a dynamic programming model of the optimal refunding strategy and the corresponding value of a callable bond. The model differs from previous work on this subject primarily in that it explicitly admits the possibility of differences between the issuer's expectations of future...

Persistent link: https://www.econbiz.de/10012478918

Stochastic Dominance Bounds on Derivative Prices in a Multiperiod Economy with Proportional Transaction Costs

Constantinides, George M. - 2002

By applying stochastic dominance arguments, upper bounds on the reservation write price of European calls and puts and lower bounds on the reservation purchase price of these derivatives are derived in the presence of proportional transaction costs incurred in trading the underlying security....

Persistent link: https://www.econbiz.de/10012469848

A Direct Approach to Arbitrage-Free Pricing of Credit Derivatives

Das, Sanjiv R. - 1998

to compute more complicated derivative securities …

Persistent link: https://www.econbiz.de/10012472175

Nonparametric Estimation of State-Price Densities Implicit in Financial Asset Prices

Ait-Sahalia, Yacine - 1995

Implicit in the prices of traded financial assets are Arrow- Debreu state prices or, in the continuous-state case, the state-price density (SPD). We construct an estimator for the SPD implicit in option prices and derive an asymptotic sampling theory for this estimator to gauge its accuracy. The...

Persistent link: https://www.econbiz.de/10012473518

Nonparametric Pricing of Interest Rate Derivative Securities

Ait-Sahalia, Yacine - 1995

We propose a nonparametric estimation procedure for continuous- time stochastic models. Because prices of derivative …

Persistent link: https://www.econbiz.de/10012473524

Too-Systemic-To-Fail : What Option Markets Imply About Sector-wide Government Guarantees

Kelly, Bryan T. - 2011

Investors in option markets price in a substantial collective government bailout guarantee in the financial sector, which puts a floor on the equity value of the financial sector as a whole, but not on the value of the individual firms. The guarantee makes put options on the financial sector...

Persistent link: https://www.econbiz.de/10012461509

Reliability Options in Renewables-Dominated Electricity Markets

McRae, Shaun D.; Wolak, Frank A. - National Bureau of Economic Research - 2024

Recent energy shortfalls in renewables-dominated electricity markets call for a mechanism to ensure demand is met under …--caused by its interaction with fixed-price forward contracts for energy. Large generators can trigger the option exercise … respond to these incentives. We analyze a standardized energy contracting approach to long-term resource adequacy that does …

Persistent link: https://www.econbiz.de/10014576645