This paper aims at supplying a decision support system tool to investors having options written on an underlying asset driven by a fractional Brownian motion (fBm). The results presented here rely on the theory of nonlinear transformations of fBm and provide the calculus of the probability...

Pricing options on a stock that pays discrete dividends has not been satisfactorily settled because of the conflicting demands of computational tractability and realistic modelling of the stock price process. Many papers assume that the stock price minus the present value of future dividends or...

This book provides an advanced treatment of option valuation. The general setting is that of 2D continuous-time models with stochastic volatility. Explicit equilibrium risk adjustments and many other new results are provided. Mathematica code for the more important formulas is included. For a...

Bayesian statistical methods are naturally oriented towards pooling in a rigorous way information from separate sources. It has been suggested that both historical and implied volatilities convey information about future volatility. However, typically in the literature implied and return...

The paper motivates and proposes a closed-form option-pricing model for markets such as grains or livestock where the price level can be expected to revert to expected production costs. The model suggests that traditional option pricing models will overprice long-term options on these markets.

We consider the problem of pricing European forward starting options in the presence of stochastic volatility. By performing a change of measure using the asset price at the time of strike determination as a numeraire, we derive a closed-form solution within Heston’s stochastic volatility...

This paper considers the problem of pricing discrete barrier options. A discrete barrier option is a barrier option where the barrier is monitored only at specific dates. This paper continues the work initiated by Broadie et al. in [B-G-K] and determine formulas to estimate the price of discrete...

Recently Kifer (2000) introduced the concept of an Israeli (or Game) option. That is a general American-type option with the added possibility that the writer may terminate the contract early inducing a payment exceeding the holder’s claim had they exercised at that moment. Kifer shows that...