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The notion of model-free implied volatility (MFIV), constituting the basis for the highly publicized VIX volatility index, can be hard to measure with accuracy due to the lack of precise prices for options with strikes in the tails of the return distribution. This is reflected in practice as the...
Persistent link: https://www.econbiz.de/10014047423
option contract is supposed to be driven by a fractional Brownian motion with Hurst parameter greater than 0.5. The paper is …
Persistent link: https://www.econbiz.de/10014213489
Closed-form pricing formulae and option Greeks are obtained for European-type options using an orthogonal polynomial …
Persistent link: https://www.econbiz.de/10012967806
option and sells a weighted average of European calls on each asset. In this case, the following important question arises …
Persistent link: https://www.econbiz.de/10013031257
In this paper, I have used simple arbitrage argument to derive a dozen of model-free option price properties. In … view, a European call (put) option for a non-dividend-paying asset can also be a European call (put) option for any other … non-dividend-paying asset, and every non-dividend-paying asset is also both a European call option and a European put …
Persistent link: https://www.econbiz.de/10013033327
An option market maker incurs funding costs when carrying and hedging inventory. To hedge a net long delta inventory … (borrowed cash and invested cash earning different interest rates) and realistic stock financing cost into the classic option … pricing theory. It is shown that an option position can be dynamically replicated and self financed in the presence of these …
Persistent link: https://www.econbiz.de/10013033978
We prove here a general closed-form expansion formula for forward-start options and the forward implied volatility smile in a large class of models, including the Heston stochastic volatility and time-changed exponential Levy models.This expansion applies to both small and large maturities and...
Persistent link: https://www.econbiz.de/10013036196
derivation of the BSE and the other the pricing definition of the option. In this paper, we show how the ambiguities in … option price based on market risk. We define random market price of the option for each market scenario. The option premium …
Persistent link: https://www.econbiz.de/10012986060
frictions, can generate option prices and implied volatilities that are in line with those of the average optionable stock. As …
Persistent link: https://www.econbiz.de/10013239997
pricing approach is that we interpret price of the option as a settlement price between buyer and seller of the option while … benchmark approach pricing defines option price as settlement between borrower and option buyer. This paper represents a Journal … most significant changes was done for 'a chooser or as-you-like' option model …
Persistent link: https://www.econbiz.de/10013099215