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Computation of Greeks using binomial trees in a jump-diffusion model

Suda, Shintaro; Muroi, Yoshifumi - In: Journal of Economic Dynamics and Control 51 (2015) C, pp. 93-110

demonstrate that the Greeks for European options converge to the Malliavin Greeks in the continuous time model. Our proposed …. Computation of the Greeks for American options is also discussed. …

Persistent link: https://www.econbiz.de/10011190671

Volatility swaps and volatility options on discretely sampled realized variance

Lian, Guanghua; Chiarella, Carl; Kalev, Petko S. - In: Journal of Economic Dynamics and Control 47 (2014) C, pp. 239-262

Volatility swaps and volatility options are financial products written on discretely sampled realized variance … approximations in the literature. We remark that although discretely sampled variance swaps and options are usually more expensive …

Persistent link: https://www.econbiz.de/10010939754

Corporate credit risk prediction under stochastic volatility and jumps

Bu, Di; Liao, Yin - In: Journal of Economic Dynamics and Control 47 (2014) C, pp. 263-281

This paper examines the impact of allowing for stochastic volatility and jumps (SVJ) in a structural model on corporate credit risk prediction. The results from a simulation study verify the better performance of the SVJ model compared with the commonly used Merton model, and three sources are...

Persistent link: https://www.econbiz.de/10010939760

Non-transferable non-hedgeable executive stock option pricing

Colwell, David B.; Feldman, David; Hu, Wei - In: Journal of Economic Dynamics and Control 53 (2015) C, pp. 161-191

To value non-transferable non-hedgeable (NTNH) contingent claims and price executive stock options (ESOs), we use a …

Persistent link: https://www.econbiz.de/10011209189

Pricing external barrier options in a regime-switching model

Kim, Jerim; Kim, Jeongsim; Joo Yoo, Hyun; Kim, Bara - In: Journal of Economic Dynamics and Control 53 (2015) C, pp. 123-143

External barrier options are two-asset options where the payoff is defined on one asset and the barrier is defined on … barrier options where the underlying asset prices follow a regime-switching model with finite regimes. The derivation is made … other asset. Numerical inversion of the Laplace transforms is used to calculate the prices of external barrier options. …

Persistent link: https://www.econbiz.de/10011209203

Rejoinder to a remark on Lin and Chang's paper ‘Consistent modeling of S&P 500 and VIX derivatives’

Lin, Yueh-Neng; Chang, Chien-Hung - In: Journal of Economic Dynamics and Control 36 (2012) 5, pp. 716-718

We appreciate the thorough review and very useful comments of Cheng, Ibraimi, Leippold, and Zhang. The suggestions have helped significantly to improve our original approximation formula and lead us to provide an exact solution under the Lin and Chang (2010) framework and we thank the editor to...

Persistent link: https://www.econbiz.de/10010870992

Valuation of stock loans with jump risk

Cai, Ning; Sun, Lihua - In: Journal of Economic Dynamics and Control 40 (2014) C, pp. 213-241

A stock loan is a special loan with stocks as collateral, which offers the borrowers the right to redeem the stocks on or before the maturity (Xia and Zhou, 2007; Dai and Xu, 2011). We investigate pricing problems of both infinite- and finite-maturity stock loans under a hyper-exponential jump...

Persistent link: https://www.econbiz.de/10010744193

Asymmetry in the jump-size distribution of the S&P 500: Evidence from equity and option markets

Kaeck, Andreas - In: Journal of Economic Dynamics and Control 37 (2013) 9, pp. 1872-1888

This paper studies alternative distributions for the size of price jumps in the S&P 500 index. We introduce a range of new jump-diffusion models and extend popular double-jump specifications that have become ubiquitous in the finance literature. The dynamic properties of these models are tested...

Persistent link: https://www.econbiz.de/10010679082

Cross-hedging minimum return guarantees: Basis and liquidity risks

Ankirchner, Stefan; Schneider, Judith C.; Schweizer, … - In: Journal of Economic Dynamics and Control 41 (2014) C, pp. 93-109

We reveal pitfalls in the hedging of insurance contracts with a minimum return guarantee on the underlying investment, e.g. an external mutual fund. We analyze basis risk entailed by hedging the guarantee with a dynamic portfolio of proxy assets for the funds. We also take account of liquidity...

Persistent link: https://www.econbiz.de/10010779390

Valuation of power options under Heston's stochastic volatility model

Kim, Jerim; Kim, Bara; Moon, Kyoung-Sook; Wee, In-Suk - In: Journal of Economic Dynamics and Control 36 (2012) 11, pp. 1796-1813

moment explodes, we provide two numerical methods to derive prices of power put and capped power call options. In spite of a …

Persistent link: https://www.econbiz.de/10010594899