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Optimal banks behaviour and procyclicality

Pederzoli, Chiara; Torricelli, Costanza - Society for Computational Economics - SCE - 2006

behaviour of three sectors: households, corporates and banking sector and we analyse banks optimal behaviour and its effects on …

Persistent link: https://www.econbiz.de/10005342871

Numerical Methods for American Spread Options under Jump Diffusion Processes

Cheang, Gerald H. L.; Chiarella, Carl; Meyer, Gunter; … - Society for Computational Economics - SCE; Finance, … - 2006

This paper examines two numerical methods for pricing of American spread options in the case where both underlying assets follow the jump-diffusion process of Merton (1976). We extend the integral equation representation for the American spread option presented by Broadie and Detemple (1997) to...

Persistent link: https://www.econbiz.de/10005342893

Pricing problems of perpetual Bermudan options

Muroi, Yoshifumi; Yamada, Takashi - Society for Computational Economics - SCE - 2006

The pricing problem of options with an early exercise feature, such as American options, is one of the important topics in mathematical finance. The pricing formulas for American options, however, have not been found in general and the numerical methods are required to derive the price of these...

Persistent link: https://www.econbiz.de/10005342951

Non-constant volatility models a comparison

Foschi, Paolo - Society for Computational Economics - SCE - 2006

Option pricing model with non-constant volatility models are compared to stochastic volatility ones. The non-constant volatility models considered are the Dupire's local volatility and Hobson and Rogers path-dependent volatility models. These approaches have the theoretical advantage of...

Persistent link: https://www.econbiz.de/10005342975

Extracting expectations from currency option prices: a comparison of methods

Micu, Marian - Society for Computational Economics - SCE - 2005

This paper compares the goodness-of-fit and the stability of six methods used to extract risk-neutral probability … density functions from currency option prices. We first compare five existing methods commonly employed to recover risk … two PDF moments as well as the quartiles of the risk-neutral distributions we find that the estimates do not differ …

Persistent link: https://www.econbiz.de/10005342989

Alternative Characterizations of the European Continuous-Installment Option Valuation Problem

Roko, Ilir; Ciurlia, Pierangelo - Society for Computational Economics - SCE - 2005

This paper is concerned with the pricing of European continuous-installment options where the aim is to determine the initial premium given the installment payments schedule. The particular feature of this pricing problem is the determination, along with the initial premium, of an optimal...

Persistent link: https://www.econbiz.de/10005343002

Option Pricing and the Implied Tail Index with the Generalized Extreme Value (GEV) Distribution

Markose, Sheri; Alentorn, Amadeo - Society for Computational Economics - SCE - 2005

the 1987 stock market crash - a large literature has developed, which aims to extract the risk neutral probability density … returns. Under the postulation of the GEV distribution in the Risk Neutral Density (RND) function for the asset returns, we …

Persistent link: https://www.econbiz.de/10005343048

Using Copulas to Construct Bivariate Foreign Exchange Distributions with an Application to the Sterling Exchange Rate Index

Schleicher, Christoph; Hurd, Matthew; Salmon, Mark - Society for Computational Economics - SCE - 2005

We model the joint distribution between the euro-sterling and the dollar-sterling exchange rate using option-implied markginal distributions that are connected via a copula function. We then derive univariate distributions for the simpliefied sterling effective exchange rate index (ERI). Our...

Persistent link: https://www.econbiz.de/10005343054

Neural Networks for Extracting the Asset Price Dynamics Implicit in Market Prices of Stock Index Options

Wu, Ing-Chyuan - Society for Computational Economics - SCE - 2005

as a speculation or hedging tool and investment banks that develop over-the-counter options on the stock index. However …, calculating value-at-risk of options positions, and versatile financial applications. …

Persistent link: https://www.econbiz.de/10005345057

Option-Pricing in Incomplete Markets: The Hedging Portfolio plus a Risk Premium-Based Recursive Approach

Ibáñez, Alfredo - Society for Computational Economics - SCE - 2005

Consider a non-spanned security C_{T} in an incomplete market. We study the risk/return trade-offs generated if this … variance portfolio is optimal. Let Câ‚€(0) be its price. Self-financing implies that the residual risk is equal to the sum of … the one-period orthogonal hedging errors, âˆ‘_{tâ‰¤T}Y_{t}(0)e^{r(T-t)}. To compensate the residual risk, a risk premium y …

Persistent link: https://www.econbiz.de/10005345058