All option trades must occur on exchanges, which typically offer auctions that improve prices over existing quotes. Wholesalers, that purchase orders from brokers, initiating auctions must be willing to trade at the existing best quote or better. For S&P500 stocks, auctions are 23% of options...

Since the launch of 50 ETF index option in February 2015, its trading volume keeps increasing year by year. This reflects the strong potential of the Chinese option market. As there were few English research on the 50 ETF option, I was very interested in applying the Black-Scholes (BS) and...

This paper investigates the performance of option investments across different stocks by computing monthly returns on at-the-money straddles on individual equities. It finds that options with high historical returns continue to significantly outperform options with low historical returns over...

This paper describes a real options valuation method for situations where the underlying asset may have negative values and the underlying project present value distribution is something of the shape between normal and lognormal distribution causing skewness to the rate of return distribution....

This paper presents a practical volatility estimation method for cash flow simulation based real option valuation with changing volatility. During cash flow simulation, present value of the future cash flows and their corresponding cash flow state variable values are recorded for all time...

This paper establishes a degree of influence between an inflation rate and a risk-free investment rate on the precision of estimated value of an Asian real option. It has been shown with an example that in the event of advancing by the inflation rate beyond profitability of risk-free...

Financial statements and an accompanying NPV calculation are embedded into a binomial tree. This generalization of traditional static NPV analysis allows the financial statements to both evolve through time and, at any given time, to vary with states of the world (similar to a Monte Carlo...

This paper addresses the classical real options problem taking debt renegotiation into account. A critical feature is that equityholders can freely initiate debt renegotiation at most once after debt issuance. We provide explicit solutions of the pricing and timing of the option to start a...

Start-up firms typically produce negative cash flows in the first years after their foundation. As a consequence, standard discounted cash flow methods are not applicable, often forcing practioneers into using theoretically dissatisfying devices like multiples. In this paper, we develop a...

This paper presents a simple framework for the analysis, valuation and simulation of several real options in the presence of shadow costs of incomplete information. Information costs can be viewed as sunk costs in the spirit of Merton's (1987) model of capital market equilibrium with incomplete...