In recent years there has been a remarkable growth of multi-asset options. These options exhibit sensitivity to the volatility of the underlying assets, as well as to their correlations. The call versus call is a product commonly used to trade correlation within the inter-dealer broker markets....

Motivated by the real-world challenges of real options evaluation faced by many companies when commodity prices exhibit dramatic volatility and project values can become negative, this paper presents a generalized framework for solving a multifactor real options problem by approximating the...

We use a novel and unique dataset to measure attention to securities—individuals’ stock-following over time (watchlists)—to provide evidence that attention to securities reacts differently to various types of uncertainty. We find that market-wide uncertainty, measured by the VIX index,...

We show that a structural model of firm decisions can produce very flexible implied volatility surfaces: upward and downward sloping, u-shaped. A calibrated version of the model is able to match many unconditional financial characteristics of the average option-able stock, and can help explain...

The paper proposes a novel direction to rationalize and quantify investors' flipping behavior and its effect on underpricing in IPOs through the use of a structural approach mode. The outcome is a proxy value that replicates investors' flipping behavior. When tested empirically, the model...

We analyze returns to lumpy projects with multiple investors. Since each investor's commitment increases the likelihood of project completion it exerts a positive externality on other investors. We show that due to this externality either a rise in the cost of abandoning the project or decreased...

The price of a European option can be computed as the expected value of the payoff function under the risk-neutral measure. For American options and path-dependent options in general, this principle cannot be applied. In this paper, we derive a model-free analytical formula for the implied...

We propose a simple multidimensional jump-diffusion process for pricing exotic derivatives with multiple underlyings. This process ensures the possibility of sudden drops in asset prices, fits several well-known empirical properties of asset returns, and incorporates dependencies between...

This paper deals with the valuation of European and American put options in jump diffusion models. A new integral transform framework for solving the partial integro-differential equation (PIDE) inherent in pricing problems is proposed. In the case of European options the solution is a single...