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...

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...

This technical note provides a detailed description of a simple but effective modeling solution to mark and risk manage plain-vanilla options on dividend futures. We focus on equity indices, as dividend products for single stocks are less liquid and observable and we derive a simple pricing...

Since the pioneering paper of Black and Scholes was published in 1973, enormous research effort has been spent on finding a multi-asset variant of their closed-form option pricing formula. In this paper, we generalize the Kirk [Managing Energy Price Risk, 1995] approximate formula for pricing a...

In this article, I incorporate the anchoring-and-adjustment heuristic into the Black-Scholes option pricing framework, and show that this is equivalent to replacing the risk-free rate with a higher interest rate. I show that the price from such a behavioralized version of the Black-Scholes model...

Taking a portfolio perspective on option pricing and hedging, we show that within the standard Black-Scholes-Merton framework large portfolios of options can be hedged without risk in discrete time. The nature of the hedge portfolio in the limit of large portfolio size is substantially different...