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Option pricing under GARCH models with generalized hyperbolic innovations (I) : methodology.

Chorro, Christophe; Guegan, Dominique; Ielpo, Florian - Centre d'Économie de la Sorbonne, Université Paris 1 … - 2008

In this paper, we present an alternative to the Black Scholes model for a discrete time economy using GARCH-type models for the underlying asset returns with Generalized Hyperbolic (GH) innovations that are potentially skewed and leptokurtic. Assuming that the stochastic discount factor is an...

Persistent link: https://www.econbiz.de/10005797744

An empirical comparison of the performance of alternative option pricing models

Ferreira, Eva; Gago, Mónica; León, Angel; Rubio, Gonzalo - In: Investigaciones Economicas 29 (2005) 3, pp. 483-523

This paper presents a comparison of alternative option pricing models based either on jump-diffusion nor stochastic …

Persistent link: https://www.econbiz.de/10005813665

Modelling the Evolution of Credit Spreads Using the Cox Process Within the HJM Framework A CDS Option Pricing Model

Chiarella, Carl; Fanelli, Viviana; Musti, Silvana - Finance Discipline Group, Business School - 2009

-Maruyama stochastic integral approximation and the Monte Carlo method are applied to develop a numerical algorithm for pricing. Finally …

Persistent link: https://www.econbiz.de/10008492106

A MODEL FOR PRICING AN OPTION WITH A FUZZY PAYOFF

Muzzioli, Silvia; Torricelli, Costanza - In: Fuzzy Economic Review VI (2001) 1, pp. 49-87

This paper sets up a one period model for pricing an option with a fuzzy payoff. The option is written on an underlying … asset that has a fuzzy price at the end of the period, modelled by means of triangular fuzzy numbers. The pricing … methodology used is the standard one for pricing derivatives, i.e. the so called risk neutral valuation. Combining the standard …

Persistent link: https://www.econbiz.de/10005000572

Reading Interest Rate and Bond Futures Options' Smiles: How PIBOR and National Operators Appreciated the 1997 French Snap Election

Coutant, S.; Jondeau, E.; Rockinger, M. - Banque de France - 1998

The aim of this paper is to compare various methods which extract a Risk Neutral Density (RND) out of PIBOR as well as of Notional interest rate futures options and to investigate how traders reacted to a political event. We first focus on 5 dates surrounding the 1997 snap election and several...

Persistent link: https://www.econbiz.de/10005036199

The Multinomial Option Pricing Model and Its Brownian and Poisson Limits

Milne, Frank; Madan, Dilip; Shefrin, Hersh - Economics Department, Queen's University - 1990

The Cox, Ross, and Rubinstein binomial model is generalized to the multinomial case. Limits are investigated and shown to yield the Black-Scholes formula in the case of continuous sample paths for a wide variety of complete market structures. In the discontinuous case a Merton-type formula is...

Persistent link: https://www.econbiz.de/10005688432

Forecasting the S&P500: A Disequilibrium Indicator.

Davidson, S.; Meyer, S. - School of Economics, Finance and Marketing, RMIT University - 1996

, however, is that there are no tools to inform inormation of the extent of mis-pricing. This paper offers such a tool. …

Persistent link: https://www.econbiz.de/10005487295

An Empirical Comparison of Default Swap Pricing Models

Houweling, Patrick; Vorst, Ton - EconWPA - 2001

In this paper we compare market prices of credit default swaps with model prices. We show that a simple reduced form model with a constant recovery rate outperforms the market practice of directly comparing bonds' credit spreads to default swap premiums. We find that the model works well for...

Persistent link: https://www.econbiz.de/10005413092

Simulation-Based Pricing of Convertible Bonds

Ammann, Manuel; Kind, Axel; Wilde, Christian - EconWPA - 2005

We propose and empirically study a pricing model for convertible bonds based on Monte Carlo simulation. The method uses … parametric representations of the early exercise decisions and consists of two stages. Pricing convertible bonds with the … pricing study of the US market, using 32 convertible bonds and 69 months of daily market prices. Our results do not confirm …

Persistent link: https://www.econbiz.de/10005413169

Bayesian Arbitrage Threshold Analysis.

Forbes, C.S.; Kalb, G.R.J.; Kofman, P. - Department of Econometrics and Business Statistics, … - 1997

A Bayesian estimation procedure is developed for estimating multiple regime vector autoregressive models appropriate for deviations from financial arbitrage relationships. This approach has clear advantages over classical stepwise threshold autoregressive analysis.

Persistent link: https://www.econbiz.de/10005581146