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Niederstätter, Florian - 2014

This paper introduces an option pricing algorithm based on non-orthogonal series expansion methods. More precisely, Gabor frame decomposition is used to split the risk neutral option pricing formula into the sum of two inner products that can be evaluated efficiently by means of Parseval's...

Persistent link: https://www.econbiz.de/10013054505

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 …. Quantum measure extends this by allowing payoffs to be noncommuting, offering a source of volatility not present in the … example, this article considers the practical benefits of quantum probability for derivative pricing, and concludes with the …

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

Valuation of Forwards, Futures, Swaps, and Options

Spina, Joel - 2014

Forwards, futures, and swaps are contractual agreements that establish transactions to be executed at a future date. Advantages of these contracts (derivatives) over owning the underlying asset include substantively lower transaction costs, and the possibility of circumventing trading...

Persistent link: https://www.econbiz.de/10013056459

Risk Premia in Option Markets

Madan, Dilip B. - 2015

Risk premia are related to price probability ratios or for continuous time pure jump processes the ratios of jump arrival rates under the pricing and physical measures. The variance gamma model is employed to synthesize densities with risk premia seen as the ratio of the three parameters. The...

Persistent link: https://www.econbiz.de/10013018782

Model-Free Methods in Valuation and Hedging of Derivative Securities

Davis, Mark - 2015

In contrast to conventional model-based derivative pricing, a recent stream of research aims to investigate what prices … paper gives a succinct survey of work in this area. After summarising results on the Black-Scholes model, the volatility …

Persistent link: https://www.econbiz.de/10013024521

A Note on Evaluation of Derivatives with Collaterals

Han, Meng - 2015

This is a revised version of our published paper Han et al. (2014). In this paper, valuation of a derivative, which is …. Our findings show that the current marking-to-market value of such a derivative consists of three components: A) the price … of the perfectly collateralized derivative (a.k.a. the price by discounting in the collateral rate of the trading …

Persistent link: https://www.econbiz.de/10013026760

Derivatives Valuation Based on Arbitrage : The Trade Is Crucial

Figlewski, Stephen - 2016

between the derivative and its underlying will eliminate riskless profits and drive the market price to the model value. "No …

Persistent link: https://www.econbiz.de/10012984824

Comments on Option Pricing

Gikhman, Ilya I. - 2016

In some papers we remarked that derivation of the Black Scholes Equation (BSE) contains mathematical ambiguities. In particular, there are two problems which can be raised by accepting Black Scholes (BS) pricing concept. One is technical derivation of the BSE and the other the pricing definition...

Persistent link: https://www.econbiz.de/10012986060

Option-Based Pricing of Wrong Way Risk for CVA

Kenyon, Chris - 2016

The two main issues for managing wrong way risk (WWR) for the credit valuation adjustment (CVA, i.e. WW-CVA) are calibration and hedging. Hence we start from a novel model-free worst-case approach based on static hedging of counterparty exposure with liquid options. We say "start from" because...

Persistent link: https://www.econbiz.de/10012986205

State Price Densities Implied from Weather Derivatives

Härdle, Wolfgang K. - 2016

A State Price Density (SPD) is the density function of a risk neutral equivalent martingale measure for option pricing, and is indispensible for exotic option pricing and portfolio risk management. Many approaches have been proposed in the last two decades to calibrate a SPD using financial...

Persistent link: https://www.econbiz.de/10012992818