Standard derivative pricing theory is based on the assumption of agents acting as price takers on the market for the … existence and uniqueness of this equation. Simulations are used to compare the hedging strategies in our model to standard Black …

Increases in market volatility of asset prices have been observed and analysed in recent years and their cause has … accounts for the feedback effect from the Black-Scholes dynamic hedging strategies on the price of the asset, and from there … beyond those of the Black-Scholes theory. They are characterized by a nonlinear partial differential equation that reduces to …

hedging. It turns out that market volatility increases and becomes price-dependent. The strength of the effects depend not … discuss in what sense hedging strategies calculated under the assumption of constant volatility are still appropriate, even if …In this paper we analyze in what way the demand generated by dynamic hedging strategies affects the equilibrium prices …

The Black Scholes Model (BSM) is one of the most important concepts in modern financial theory both in terms of …

Estimation of volatility of financial time series plays a crucial role in pricing derivatives. Volatility is often … estimated from historical data; however, it is well known that volatility varies in time. We propose a method to choose a … suitable length of historical data to estimate contemporary volatility. The method is based on adaptation of a procedure used …

The volatility estimation is a crucial problem for pricing derivatives. The traditional implied volatility approach … volatility ?is endogenous and depends on the change in the firm’s financial leverage. These authors give an analytic … volatility of the return on the firm’s asset are constant. In this work, we will generalize this result by allowing these …