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A Simple Derivation of Risk-Neutral Probability in the Binomial Option Pricing Model

Orosi, Greg - 2019

The traditional derivation of risk-neutral probability in the binomial option pricing framework used in introductory …

Persistent link: https://www.econbiz.de/10012904924

Transform Analysis for Markov Processes and Applications : An Operator-based Approach

Cui, Zhenyu - 2019

We establish a novel duality relationship between continuous and discrete non-negative additive functionals of stochastic (not necessarily Markovian) processes and their right inverses. For general Markov processes, we further extend and develop a theoretical and computational framework for the...

Persistent link: https://www.econbiz.de/10012892626

First-Passage Probability, Jump Models and Intra-Horizon Risk

Bakshi, Gurdip - 2016

This paper proposes a risk measure, based on first-passage probability, which reflects intra-horizon risk in jump models with finite or infinite jump activity. Our empirical investigation shows, first, that the proposed risk measure consistently exceeds the benchmark Value-at-Risk (VaR). Second,...

Persistent link: https://www.econbiz.de/10013008970

In Search of Schrödinger's Cap : Pricing Derivatives with Quantum Probability (Slides)

McCloud, Paul - 2014

Classical measure underpins the foundations of financial derivative pricing, as the classical expectation satisfies the essential principles of replicability (linearity) and no-arbitrage (positivity) required by any reasonable pricing model. Quantum measure extends this by allowing payoffs to be...

Persistent link: https://www.econbiz.de/10013054564

Estimating Real-world Probabilities : a Forward-looking Behavioral Framework

Crisóstomo, Ricardo - 2021

estimated from option prices …

Persistent link: https://www.econbiz.de/10013250112

Simulated Conditional Range Probabilities : An Excellent Approximation for the m out of n Day Provision

Guo, Shuxin - 2015

challenging problem of pricing MooN can then be better approximated. For a purposely designed exotic call option with a 20 out of …

Persistent link: https://www.econbiz.de/10013031862

In Search of Schrödinger's Cap : Pricing Derivatives with Quantum Probability

McCloud, Paul - 2014

Persistent link: https://www.econbiz.de/10013062494

Markov cubature rules for polynomial processes

Filipović, Damir; Larsson, Martin; Pulido, Sergio - 2016

rules aid the tractability of path-dependent tasks such as American option pricing in models where the underlying factors …

Persistent link: https://www.econbiz.de/10011626304

Signed Infinitely Divisible Signed Probability Models in Finance

Madan, Dilip B. - 2020

Procedures for constructing the characteristic functions of risk neutral densities, from option prices at a fixed … formal Lévy tails embedded in option prices are observed on occasion to be negative, reflecting signed Lévy measures. Though … developed and calibrated to short maturity option prices. The ratio models provide significant improvements over their non …

Persistent link: https://www.econbiz.de/10012846690

Optimal Shortfall Hedging of Credit Risk

Lotz, Christopher - 1999

In this paper we examine the problem of partially hedging a given credit risk exposure. We derive hedges which satisfy certain optimality criteria: For a given investment into the hedge they minimize the remaining risk, or vice versa. This is motivated by the fact that it is a core business of...

Persistent link: https://www.econbiz.de/10005841289