Market option prices in last 20 years confirmed deviations from the Black and Scholes (BS) models assumptions, especially on the BS implied volatility. Implied binomial trees (IBT) models capture the variations of the implied volatility known as "volatility smile". They provide a discrete...

Motivated by the changing nature of the natural gas industry in the European Union driven by the liberalization process, we focus on pricing of gas swing options. These options are embedded in typical gas sales agreements in the form of offtake flexibility concerning volume and time. The gas...

In order to increase overall transparency on key operational information, power transmission system operators publish an increasing amount of fundamental data, including forecasts of electricity demand and available capacity. We develop a fundamental model for electricity prices which lends...

Empirical studies on quoted options highlight deviations from the theoretical model of Black and Scholes; this is due to different causes, such as assumptions regarding the price dynamics, markets frictions and investors' attitude toward risk. In this contribution, we focus on this latter issue...

This paper deals with the valuation of European and American put options in jump diffusion models. A new integral transform framework for solving the partial integro-differential equation (PIDE) inherent in pricing problems is proposed. In the case of European options the solution is a single...

We test the accuracy and hedging performance of the deltas given by a range of nonparametric measure changes. The nonparametric models accurately estimate deltas across a number of asset price dynamics. The optimal nonparametric measure change displays superior estimation bias, which depends on...

Haley and Walker (2010) present the Euclidean and Empirical Likelihood nonparametric option pricing models as alternative tilts to Stutzer's (1996) Canonical pricing method. We empirically test the comparative strengths of each of these methods using a large sample of traded options on the...

Recent general equilibrium models prescribe predictable dynamics in the volatility surfaces that are implied by observed option prices. In this paper we investigate the predictability of surfaces, using extensive time series of implied volatilities from over-the-counter options on eight...

I propose a simple generalization of put-call parity that holds for a large class of exotic European options. The result rests on a reasonable generalization of the concepts of put and call. The proof is based on the fundamental theorem of arbitrage pricing and elementary properties of real...

We study sovereign default risk as measured by credit default swap (CDS) spreads of Eurozone member states between 2008 and 2016. Applying a structural credit risk model we analyze to what extent contingent claims analysis can explain spreads given fundamental balance sheet information. First...