This paper describes a method for computing risk-neutral density functions based on the option-implied volatility smile … robust and avoids violations of option no-arbitrage restrictions that can lead to negative probabilities and other impla …

A barrier option is a financial derivative which includes an activation (or deactivation) clause within a standard … vanilla option. For instance, a copper mining company could secure to sell in at least K dollars each ton of copper during the … next year, by buying M European put options. However, it could purchase a less expensive derivative (a barrier option …

We study a new class of three-factor affine option pricing models with interdependent volatility dynamics and a … largely unrelated to the volatility dynamics. We estimate our models using about fourteen years of S&P 500 index option data …-related dynamics of index option smiles …

In reaction to the well-known stylized facts observed in market data for stocks and options, a multitude of option … construction outperform the BS model in terms of fitting observed option prices, there is only little knowledge on which models are … this gap, we conduct a comprehensive empirical comparison of a wide range of option pricing models based on time …

pricing error increases with index returns. The unrestricted model has significantly less option pricing bias for calls than … the restricted model. The option pricing error for calls in the restricted model has much larger negative bias near the … puts. Finally, the option pricing errors are significantly affected by moneyness and time to expiration for all cases; this …

This paper considers the problem of European option pricing in the presence of proportional transaction costs when the … utility of terminal wealth, we transform the option pricing into stochastic optimal control problems, and argue that the value … based on the connection of the free boundary problem to an optimal stopping problem. Numerical examples of option pricing …

-diffusion model and then use it to approximate European basket option values. If the local volatility function is time independent …