This paper discusses the pitfalls in the pricing of barrier options using approximations of the underlying continuous … trinomial model and a further modified model where price changes occur at the jump times of a Poisson process. After the …

Black-Scholes formula for pricing the call option. The assets volatility is a linear function of the asset value and the …The basic model of financial economics is the Samuelson model of geometric Brownian motion because of the celebrated … model garantees positive asset prices. In this paper it is shown that the pricing partial differential equation can be …

pricing dierencesbetween index and stock options, the cross-sectional variation in stock option expensiveness,the volatility …We explore the pricing of variance risk by decomposing stocks' total variance into systematicand idiosyncratic return … mispricing puzzle, and the signicant returns earned on various option portfoliostrategies. Our results are consistent with …

pricing dierencesbetween index and stock options, the cross-sectional variation in stock option expensiveness,the volatility …We explore the pricing of variance risk by decomposing stocks' total variance into systematicand idiosyncratic return … mispricing puzzle, and the signicant returns earned on various option portfoliostrategies. Our results are consistent with …

We develop a discrete-time stochastic volatility option pricing model, which exploits the informationcontained in high … stochastic volatility pricing models. The pricing improvementcan be ascribed to: (i) The direct use of the RV, which provides a …

parametric freedom to allow for the input of additional option data apartfrom that implicit in the initial density. The scheme is …

We provide a new method to derive the state price density per unit probabilitybased on option prices and GARCH model …-Gaussian innovations, the pricing kernel puzzle that arises in Jackwerth(2000) disappears both in a single day and over an average of …