Showing 1 - 10 of 19
Market option prices in last 20 years confirmed deviations from the Black and Scholes (BS) models assumptions, especially on the BS implied volatility. Implied binomialtrees (IBT) models capture the variations of the implied volatility known as \volatility smile". They provide a discrete...
Persistent link: https://www.econbiz.de/10005860517
In January 2005 the EU-wide CO2 emissions trading system (EU-ETS) has formally entered into operation.Within the new trading system, the right to emit a particular amount of CO2 becomes a tradable commodity - called EU Allowances (EUAs) - and affected companies, traders and investors will face...
Persistent link: https://www.econbiz.de/10005861246
We present solutions to some discounted optimal stopping problems for the maximum process in a model driven by a Brownian motion and a compound Poisson process with exponential jumps. The method of proof is based on reducing the initial problems to integro-differential free-boundary problems...
Persistent link: https://www.econbiz.de/10005861277
We present a solution to some discounted optimal stopping problem for the maximum of a geometric Brownian motion on a finite time interval. The method of proof is based on reducing the initial optimal stopping problem with the continuation region determined by an increasing continuous boundary...
Persistent link: https://www.econbiz.de/10005861278
A new algorithm for finding value functions of finite horizon optimal stopping problems in one-dimensional diffusion models is presented. It is based on a time discretization of the corresponding integral equation. The proposed iterative procedure for solving the discretized integral equation...
Persistent link: https://www.econbiz.de/10005861316
Here we develop an approach for efficient pricing discrete-time American and Bermudan options which employs the fact that such options are equivalent to theEuropean ones with a consumption, combined with analysis of the market model over a small number of steps ahead. This approach allows...
Persistent link: https://www.econbiz.de/10005861418
The calibration of financial models has become rather important topic in recent years mainly because of the need to price increasingly complex options in a consistent way. The choice of the underlying model is crucial for the good performance of any calibration procedure. Recent empirical...
Persistent link: https://www.econbiz.de/10005861421
We investigate the problem of calibrating an exponential Lévy model based on market prices of vanilla options. We show that this inverse problem is in general severely ill-posed and we derive exact minimax rates of convergence. The estimation procedure we propose is based on the explicit...
Persistent link: https://www.econbiz.de/10005861424
Implied volatility is one of the key issues in modern quantitative finance, since plain vanilla option prices contain vital information for pricing and hedging of exotic and illiquid options. European plain vanilla options are nowadays widely traded, which results in a great amount of...
Persistent link: https://www.econbiz.de/10005862106
State price densities (SPD) are an important element in applied quantitativefinance. In a Black-Scholes model they are lognormal distributions with constant volatility parameter. In practice volatility changes and the distribution deviates from log-normality. We estimate SPDs using EUREX option...
Persistent link: https://www.econbiz.de/10005862107