This paper introduces an option pricing algorithm based on non-orthogonal series expansion methods. More precisely, Gabor frame decomposition is used to split the risk neutral option pricing formula into the sum of two inner products that can be evaluated efficiently by means of Parseval's...

In some papers we remarked that derivation of the Black Scholes Equation (BSE) contains mathematical ambiguities. In particular, there are two problems which can be raised by accepting Black Scholes (BS) pricing concept. One is technical derivation of the BSE and the other the pricing definition...

An option market maker incurs funding costs when carrying and hedging inventory. To hedge a net long delta inventory, for example, she pays a fee to borrow stock from the security lending market. Because of haircuts, she posts additional cash margin to the lender which needs to be financed at...

Investment behaviour, techniques and choices have evolved in the options markets since the launch of options trading in 1973. Today, we are entering the field of Big Data and the explosion of information, which has become the main feature of science, impacts investors' decisions and their...

We show that a dynamic model of investment and capital structure choices, where the firm faces real and financial frictions, can generate option prices and implied volatilities that are in line with those of the average optionable stock. As the balance between the fundamental economic forces...

In this paper, I have used simple arbitrage argument to derive a dozen of model-free option price properties. In addition to deriving the Greeks under the model-free framework, the results show that first, in contrast to the traditional view, a European call (put) option for a...

We show that a structural model of firm decisions can produce very flexible implied volatility surfaces: upward and downward sloping, u-shaped. A calibrated version of the model is able to match many unconditional financial characteristics of the average option-able stock, and can help explain...

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...

The standard shifted lognormal model, defined by just two parameters, provides a remarkably good fit to the market implied volatilities of VIX options.Inspired by an analytic approximation derived by Lee and Wang, we propose a simple, intuitive extension that provides better empirical fits while...

This paper investigates the pricing of single-asset autocallable barrier reverse convertibles in the Heston local-stochastic volatility (LSV) model. Despite their complexity, autocallable structured notes are the most traded equity-linked exotic derivatives. The autocallable payoff embeds an...