This paper extends the static hedge portfolio (SHP) approach of Derman, Ergener, and Kani (1995) and Carr, Ellis, and Gupta (1998) to price and/or hedge American knock-out options. We construct a SHP to match the complicated boundary conditions of American barrier options. Detailed analyses of...

This paper derives the pricing bounds of a currency cross-rate option using the option prices of two related dollar rates via a copula theory and presents the analytical properties of the bounds under the Gaussian framework. Our option pricing bounds are useful, because (1) they are general in...

Given that both S&P 500 index and VIX options essentially contain information on the future dynamics of the S&P 500 index, in this study, we set out to empirically investigate the informational roles played by these two option markets with regard to the prediction of returns, volatility and...