Lookback options provide investors with perfect market timing services. However, these options are hardly ever traded because they are much more expensive than ordinary options. The problem with standard lookbacks is that they provide the investor with much more timing than typically required....

In this article we present a model of Samp;P 500 futures mispricing that is able to capture all major stylized facts observed in actual Samp;P 500 mispricings behavior. The model itself is inspired by theoretical considerations as well as empirical observations. The model's parameters are...

In this article we study the pricing and hedging of options whose payoff is a polynomial function of the underlying reference index at expiration; so-called power options. Working in the Black-Scholes (1973) framework, we derive closed-form formulas for the prices of general power calls and...

The specifications of the lookback options traded in today's OTC markets do not match the specifications of the contracts studied by academics. In practice, monitoring of the reference index may be done discretely and at the same time be limited to a specific subperiod. In this article we show...

Barrier options come in many forms. In this article we study the pricing of discrete partial barrier options where the barrier level may change deterministically during the monitoring period and monitoring takes place at not-necessarily equally spaced points in time. We provide closed-form...

Future volatility is a key input for pricing and hedging derivatives and for quantitative investment strategies in general. There are many different approaches. This article investigates whether random walk, GARCH (1,1), EGARCH (1,1) and stochastic volatility models of return volatility behavior...

Derivatives traded in the OTC markets may sometimes involve both asset price risk and exchange rate risk. This article provides an unified treatment of the pricing and hedging of path independent international equity derivatives. After modeling the international economy, we derive a partial...

This article describes the valuation, hedging and applications of contingent premium options (CPOs). We derive closed-form formulas for path independent and path dependent CPOs that address most cases of practical importance. The resulting hedge ratios show that when it is not possible to hedge...

In this article we use stochastic simulation methods to study the performance of a number of different dynamic portfolio insurance strategies, including option replicating portfolio insurance (ORPI), constant proportion portfolio insurance (CPPI) and a modified stop-loss (MSLI) strategy. We...

We use stochastic simulation methods to study the efficiency of delta-hedging strategies for ordinary, look-back, and Asian call options on the Samp;P 500 index. Execution is assumed to take place in either the cash or the futures market. Our results clearly show the inadequacy of delta hedging...