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Madan, Dilip B. - 2018

In this paper, we investigate the behavior of the bitcoin (BTC) price through the vanilla options available on the market. We calibrate a series of Markov models on the option surface. In particular, we consider the Black-Scholes model, Laplace model, five Variance Gamma related models and the...

Persistent link: https://www.econbiz.de/10012911038

Contingent claims valued and hedged by pricing and investing in a basis

Milne, Frank (contributor); Madan, Dilip B. (contributor) - 2008

use these to construct the implied equivalent martingale measure density with respect to the reference measure, which in … used to illustrate the calculations involved. On this illustrative data set the equivalent martingale measure deviates from … smaller movements. -- European option pricing ; Hermite polynomials ; Hilbert space ; martingale measures ; S & P 500 index …

Persistent link: https://www.econbiz.de/10003790967

Option pricing with V. G. Martingale components

Milne, Frank (contributor); Madan, Dilip B. (contributor) - 2008

European call options are priced when the uncertainty driving the stock price follows the V. G. stochastic process (Madan and Seneta 1990). The incomplete markets equilibrium change of measure is approximated and identified using the log return mean. variance, and kurtosis. An exact equilibrium...

Persistent link: https://www.econbiz.de/10003790969

Conic Option Pricing

Madan, Dilip B. - 2019

Lower and upper prudent valuations in two price economies obtained on sufficiently distorting physical probabilities for returns to horizons matching option maturities straddle the market prices of options. Market prices are then modeled as geometric averages of the extremal valuations. Upper...

Persistent link: https://www.econbiz.de/10012902130

Option Surfaces Through the Lens of the Black Merton Scholes Model

Madan, Dilip B. - 2017

Summarizing option surfaces using parametric representations, their movements are decomposed into a number of effects. Arguments are presented for treating traditional sensitivity attribution terms as regression factors leading to significant attribution improvements

Persistent link: https://www.econbiz.de/10012966857

Risk Premia in Option Markets

Madan, Dilip B. - 2015

Risk premia are related to price probability ratios or for continuous time pure jump processes the ratios of jump arrival rates under the pricing and physical measures. The variance gamma model is employed to synthesize densities with risk premia seen as the ratio of the three parameters. The...

Persistent link: https://www.econbiz.de/10013018782

Option Implied VIX, Skew and Kurtosis Term Structure Indices

Madan, Dilip B. - 2020

Comparisons are made of the CBOE skew index with those derived from parametric skews of bilateral gamma models and from the differentiation of option implied characteristic exponents. Discrepancies may be attributed to strike discretization in evaluating prices of powered returns. The remedy...

Persistent link: https://www.econbiz.de/10012828027

Pricing and Hedging Options on Assets with Options on Related Assets

Madan, Dilip B.; Wang, King - 2020

The problem studied is the pricing of options on the CBOE Skew index. The option pricing theory developed seeks to hedge the risk using positions in the market for options on a related asset and the option is then priced at the cost of this hedge. The theory is applied to pricing VIX options...

Persistent link: https://www.econbiz.de/10014095529

Jointly Modeling of VIX and SPX Options at a Single and Common Maturity with Risk Management Applications

Carr, Peter - 2013

A double gamma model is proposed for the VIX. The VIX is modeled as gamma distributed with a mean and variance that respond to a gamma distributed realized variance over the preceeding month. Conditionally on VIX and the realized variance, the logarithm of the stock is variance gamma distributed...

Persistent link: https://www.econbiz.de/10013085026

Short Positions, Rally Fears and Option Markets

Eberlein, Ernst - 2010

Index option pricing on world market indices are investigated using Lévy processes with no positive jumps. Economically this is motivated by the possible absence of longer horizon short positions while mathematically we are able to evaluate for such processes the probability of a Rally Before a...

Persistent link: https://www.econbiz.de/10013148695