We derive a closed-form solution for the price of a European call option in the presence of ambiguity about the stochastic process that determines the variance of the underlying asset’s return. The option pricing formula of Heston (Rev Financ Stud 6(2):327–343, <CitationRef CitationID="CR43">1993</CitationRef>) is a particular case of...</citationref>

In this study, we analyze whether model complexity improves accuracy of CoCo pricing models. We compare the out-of-sample pricing ability of four models using a broad dataset that contains all CoCos which were issued between January 1, 2013 and May 31, 2016 in euros. The regarded models include...

We find that option-implied information such as forward-looking variance, skewness and the variance risk premium are sensitive to the way the volatility surface is constructed. For some state-of-the-art volatility surfaces, the differences are economically surprisingly large and lead to...

We present a generalization of Cochrane and Saá-Requejo's good-deal bounds which allows to include in a flexible way the implications of a given stochastic discount factor model. Furthermore, a useful application to stochastic volatility models of option pricing is provided where closed-form...

We derive closed form European option pricing formulae under the general equilibrium framework for underlying assets that have an <InlineEquation ID="IEq1"> <EquationSource Format="TEX">$$N$$</EquationSource> <EquationSource Format="MATHML"> <math xmlns:xlink="http://www.w3.org/1999/xlink"> <mi>N</mi> </math> </EquationSource> </InlineEquation>-mixture of transformed normal distributions. The component distributions need not belong to the same class but must all be transformed normal. An...</equationsource></equationsource></inlineequation>

This study extends the GARCH pricing tree in Ritchken and Trevor (J Financ 54:366–402, <CitationRef CitationID="CR33">1999</CitationRef>) by incorporating an additional jump process to develop a lattice model to value options. The GARCH-jump model can capture the behavior of asset prices more appropriately given its consistency with...</citationref>