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The term structure of systematic and idiosyncratic risk

Hollstein, Fabian; Prokopczuk, Marcel; Wese Simen, Chardin - 2017

We study the term structure of variance (total risk), systematic and idiosyncratic risk. Consistent with the expectations hypothesis, we find that, for the entire market, the slope of the term structure of variance is mainly informative about the path of future variance. Thus, there is little...

Persistent link: https://www.econbiz.de/10011751173

Recursive Algorithms for Pricing Discrete Variance Options and Volatility Swaps Under Time-Changed Lèvy Processes

Zheng, Wendong - 2017

We propose robust numerical algorithms for pricing discrete variance options and volatility swaps under general time … volatility derivatives with low frequency of monitoring and/or short maturity. The pricing properties of various variance and … volatility derivatives under various time-changed Lèvy processes and the Heston model are also investigated …

Persistent link: https://www.econbiz.de/10012973000

Bounds for VIX Futures Given S&P 500 Smiles

Guyon, Julien - 2017

We derive sharp bounds for the prices of VIX futures using the full information of S&P 500 smiles. To that end, we formulate the model-free sub/superreplication of the VIX by trading in the S&P 500 and its vanilla options as well as the forward-starting log-contracts. A dual problem of...

Persistent link: https://www.econbiz.de/10012968113

Retail Option Traders and the Implied Volatility Surface

Eaton, Gregory W.; Green, T. Clifton; Roseman, Brian; … - 2022

associated with reduced implied volatility overall, and the effect is stronger for options purchased by retail investors. In … contrast, implied volatility increases for long-dated options during outages, consistent with reduced retail writing activity …. The findings highlight the importance of retail demand pressure on the implied volatility surface and suggest that retail …

Persistent link: https://www.econbiz.de/10013289580

Pricing European and Barrier Options in the Fractional Black-Scholes Market

Necula, Ciprian - 2008

build upon the framework developed in Necula (2007) for the valuation of derivative products in the fractional Black …

Persistent link: https://www.econbiz.de/10014213489

An Orthogonal Series Expansions Method to Hedge and Price European-Type Options

Chan, Ron - 2017

volatility models. We provide a succinct error analysis to demonstrate that we can achieve an exponential convergence rate in the …

Persistent link: https://www.econbiz.de/10012967806

Option-Based Credit Spreads

Culp, Christopher L. - 2017

We present a novel empirical benchmark for analyzing credit risk using “pseudo firms” that purchase traded assets financed with equity and zero-coupon bonds. By no-arbitrage, pseudo bonds are equivalent to Treasuries minus put options on pseudo-firm assets. Empirically, like corporate...

Persistent link: https://www.econbiz.de/10012972376

Is the Information Obtained from European Options on Equally Weighted Baskets Enough to Determine the Prices of Exotic Derivatives Such as Worst of Options?

Marabel Romo, Jacinto - 2015

volatility of the underlying assets, as well as to their correlations. The call versus call is a product commonly used to trade …

Persistent link: https://www.econbiz.de/10013031257

Extending the Black-Scholes Option Pricing Theory to Account for an Option Market Maker's Funding Costs

Lou, Wujiang - 2015

An option market maker incurs funding costs when carrying and hedging inventory. To hedge a net long delta inventory, for example, she pays a fee to borrow stock from the security lending market. Because of haircuts, she posts additional cash margin to the lender which needs to be financed at...

Persistent link: https://www.econbiz.de/10013033978

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