Mellin transforms in option pricing theory were introduced by Panini and Srivastav (2004). In this contribution, we generalize their results to European power options. We derive Black-Scholes-Merton-like valuation formulas for European power put options using Mellin transforms. Thereafter, we...

We extend a framework based on Mellin transforms and show how to modify the approach to value American call options on dividend paying stocks. We present a new integral equation to determine the price of an American call option and its free boundary using modi ed Mellin transforms. We also show...

We are concerned with the valuation of European options in Heston's stochastic volatility model with correlation. Based on Mellin transforms we present new closed-form solutions for the price of European options and hedging parameters. In contrast to Fourier-based approaches where the...

Inspired by the theory of social imitation (Weidlich 1970) and its adaptation to financial markets by the Coherent Market Hypothesis (Vaga 1990), we present a behavioral model of stock prices that supports the overreaction hypothesis. Using our dynamic stock price model, we develop a two factor...

The correct modeling of default dependence is essential for the valuation of multiname credit derivatives. However for the pricing of synthetic CDOs a one-factor Gaussian copula model with constant and equal pairwise correlations, default intensities and recovery rates for all assets in the...

We focus on a preference based approach when pricing options in a market driven by fractional Brownian motion. Within this framework we derive formulae for fractional European options using the traditional idea of conditional expectation. The obtained formulae - as well as further results -...

This paper investigates the dynamics of the term structure of bond market illiquidity premia using data on German bond market segments which differ only with respect to their liquidity. We analyze the interaction between different parts of the term structure and identify economic factors that...

The volatility information content of stock options for individual firms is measured using option prices for 149 U.S. firms and the S&P 100 index. ARCH and regression models are used to compare volatility forecasts defined by historical stock returns, at-the-money implied volatilities and...

We analyze trading opportunities that arise from differences between the bond and the CDS market. By simultaneously entering a position in a CDS contract and the underlying bond, traders can build a default-risk free position that allows them to repeatedly earn the difference between the bond...

We find and describe four futures markets where the bid-ask spread is bid down to the fixed price tick size practically all the time, and which match counterparties using a pro-rata rule. These four markets' offered depths at the quotes on average exceed mean market order size by two orders of...