A quantitative analysis on the pricing of forward starting options under stochastic volatility and stochastic interest rates is performed. The main finding is that forward starting options not only depend on future smiles, but also directly on the evolution of the interest rates as well as the...

An enhanced option pricing framework that makes use of both continuous and discontinuous time paths based on a geometric Brownian motion and Poisson-driven jump processes respectively is performed in order to better fit with real-observed stock price paths while maintaining the analytical...

In several countries, classical options markets coexist with markets for bank-issued options, also termed warrants. It is an open question if warrant issuers purely adopt options market information about future volatility or if they contribute to volatility discovery by their own. As a result,...

• It is not widely emphasized in the literature that derivatives are complex random quantities which should, by custom, be characterized by their probability density functions. • It is understood that Black-Scholes style of derivatives pricing represents an expected value, i.e. the...