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Niederstätter, Florian - 2014

This paper introduces an option pricing algorithm based on non-orthogonal series expansion methods. More precisely, Gabor frame decomposition is used to split the risk neutral option pricing formula into the sum of two inner products that can be evaluated efficiently by means of Parseval's...

Persistent link: https://www.econbiz.de/10013054505

Extending the Black-Scholes Option Pricing Theory to Account for an Option Market Maker's Funding Costs

Lou, Wujiang - 2015

An option market maker incurs funding costs when carrying and hedging inventory. To hedge a net long delta inventory, for example, she pays a fee to borrow stock from the security lending market. Because of haircuts, she posts additional cash margin to the lender which needs to be financed at...

Persistent link: https://www.econbiz.de/10013033978

Options pricing by Monte Carlo simulation, binomial tree and BMS model : a comparative study

Bendob, Ali; Bentouir, Naima - In: Journal of banking and financial economics 1 (2019) 11, pp. 79-95

Investment behaviour, techniques and choices have evolved in the options markets since the launch of options trading in 1973. Today, we are entering the field of Big Data and the explosion of information, which has become the main feature of science, impacts investors' decisions and their...

Persistent link: https://www.econbiz.de/10012115106

0DTE Option Pricing

Bandi, Federico M.; Fusari, Nicola; Renò, Roberto - 2023

The market for ultra short-term (zero days-to-expiry or 0DTE) options has grown exponentially over the last few years. In 2023, daily volume in 0DTEs reached over 45% of overall daily options volume. After briefly describing this exploding new market, we present a novel pricing formula designed...

Persistent link: https://www.econbiz.de/10014348685

Endogenous Option Pricing

Gamba, Andrea; Saretto, Alessio - 2021

We show that a dynamic model of investment and capital structure choices, where the firm faces real and financial frictions, can generate option prices and implied volatilities that are in line with those of the average optionable stock. As the balance between the fundamental economic forces...

Persistent link: https://www.econbiz.de/10013239997

Model-Free Option Prices

Chang, Kuo-Ping - 2015

In this paper, I have used simple arbitrage argument to derive a dozen of model-free option price properties. In addition to deriving the Greeks under the model-free framework, the results show that first, in contrast to the traditional view, a European call (put) option for a...

Persistent link: https://www.econbiz.de/10013033327

Endogenous Option Pricing

Gamba, Andrea; Saretto, Alessio - 2022

We show that a structural model of firm decisions can produce very flexible implied volatility surfaces: upward and downward sloping, u-shaped. A calibrated version of the model is able to match many unconditional financial characteristics of the average option-able stock, and can help explain...

Persistent link: https://www.econbiz.de/10013295154

Empirical Examinations of the Black-Scholes Model and Merton Jump-Diffusion Model in the Chinese Options Market

Zhang, Zhiwei - 2020

Since the launch of 50 ETF index option in February 2015, its trading volume keeps increasing year by year. This reflects the strong potential of the Chinese option market. As there were few English research on the 50 ETF option, I was very interested in applying the Black-Scholes (BS) and...

Persistent link: https://www.econbiz.de/10014352165

On a new class of barrier options

Valle, Gerardo Hernández del - 2014

A barrier option is a financial derivative which includes an activation (or deactivation) clause within a standard … next year, by buying M European put options. However, it could purchase a less expensive derivative (a barrier option …, pricing a barrier derivative is only known for barriers that are represented by linear, quadratic, and square root functions …

Persistent link: https://www.econbiz.de/10010437145

Three Make a Dynamic Smile - Unspanned Skewness and Interacting Volatility Components in Option Valuation

Gruber, Peter H. - 2011

We study a new class of three-factor affine option pricing models with interdependent volatility dynamics and a stochastic skewness component unrelated to volatility shocks. These properties are useful in order (i) to model a term structure of implied volatility skews more consistent with the...

Persistent link: https://www.econbiz.de/10013128475

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