We examine arithmetic Brownian motion as an alternative framework for option valuation and related tasks. After reexamining empirical evidence, we compare and contrast option valuation based on geometric Brownian motion and arithmetic Brownian motion. We identify an alternative way to handle...

A general option-based approach to estimating the discount for lack of marketability is offered. It is general enough to capture maturity, volatility, hedging availability, and investor skill as well as other important factors. The model is shown to contain the Chaffe model, the Longstaff model,...

This paper evaluates the underperformance of individual equity options relative to their replicating portfolios. Considering a high-dimensional set of variables, we use a machine learning approach to identify the characteristics of options and their underlying stocks that provide incremental...