Author: Dao Xiong Teng
Publisher:
ISBN:
Category : Options (Finance)
Languages : en
Pages : 49
Book Description
At the heart of the classical Black-Scholes option pricing model lies the no arbitrage pricing principal with the assumption of a complete market which renders options as redundant assets. It is widely accepted that the market prices of options are generally inconsistent with the pricing model. In the existing literature, most papers have attributed the inconsistencies to the unrealistic assumptions of the classical Black-Scholes model. This paper proposes that even if option prices do follow the Black-Scholes model perfectly, we should not expect the market prices to coincide with prices calculated from the model. We propose two simple alternative approaches to the model on market prices of options, keeping most of the major assumptions under the classical model. We also examine their efficacies in estimating future volatilities and their efficacies in providing a perfect hedge to a long position in various options. Empirical results show some evidence that supports the alternative approaches. Results also show that for certain classifications of options, the alternative models provide a better delta-neutral portfolio.
A Markup Approach to Option Pricing
Author: Dao Xiong Teng
Publisher:
ISBN:
Category : Options (Finance)
Languages : en
Pages : 49
Book Description
At the heart of the classical Black-Scholes option pricing model lies the no arbitrage pricing principal with the assumption of a complete market which renders options as redundant assets. It is widely accepted that the market prices of options are generally inconsistent with the pricing model. In the existing literature, most papers have attributed the inconsistencies to the unrealistic assumptions of the classical Black-Scholes model. This paper proposes that even if option prices do follow the Black-Scholes model perfectly, we should not expect the market prices to coincide with prices calculated from the model. We propose two simple alternative approaches to the model on market prices of options, keeping most of the major assumptions under the classical model. We also examine their efficacies in estimating future volatilities and their efficacies in providing a perfect hedge to a long position in various options. Empirical results show some evidence that supports the alternative approaches. Results also show that for certain classifications of options, the alternative models provide a better delta-neutral portfolio.
Publisher:
ISBN:
Category : Options (Finance)
Languages : en
Pages : 49
Book Description
At the heart of the classical Black-Scholes option pricing model lies the no arbitrage pricing principal with the assumption of a complete market which renders options as redundant assets. It is widely accepted that the market prices of options are generally inconsistent with the pricing model. In the existing literature, most papers have attributed the inconsistencies to the unrealistic assumptions of the classical Black-Scholes model. This paper proposes that even if option prices do follow the Black-Scholes model perfectly, we should not expect the market prices to coincide with prices calculated from the model. We propose two simple alternative approaches to the model on market prices of options, keeping most of the major assumptions under the classical model. We also examine their efficacies in estimating future volatilities and their efficacies in providing a perfect hedge to a long position in various options. Empirical results show some evidence that supports the alternative approaches. Results also show that for certain classifications of options, the alternative models provide a better delta-neutral portfolio.
Mathematical Modeling And Methods Of Option Pricing
Author: Lishang Jiang
Publisher: World Scientific Publishing Company
ISBN: 9813106557
Category : Business & Economics
Languages : en
Pages : 343
Book Description
From the unique perspective of partial differential equations (PDE), this self-contained book presents a systematic, advanced introduction to the Black-Scholes-Merton's option pricing theory.A unified approach is used to model various types of option pricing as PDE problems, to derive pricing formulas as their solutions, and to design efficient algorithms from the numerical calculation of PDEs. In particular, the qualitative and quantitative analysis of American option pricing is treated based on free boundary problems, and the implied volatility as an inverse problem is solved in the optimal control framework of parabolic equations.
Publisher: World Scientific Publishing Company
ISBN: 9813106557
Category : Business & Economics
Languages : en
Pages : 343
Book Description
From the unique perspective of partial differential equations (PDE), this self-contained book presents a systematic, advanced introduction to the Black-Scholes-Merton's option pricing theory.A unified approach is used to model various types of option pricing as PDE problems, to derive pricing formulas as their solutions, and to design efficient algorithms from the numerical calculation of PDEs. In particular, the qualitative and quantitative analysis of American option pricing is treated based on free boundary problems, and the implied volatility as an inverse problem is solved in the optimal control framework of parabolic equations.
Options
Author: Lane Hughston
Publisher:
ISBN: 9781899332663
Category : Business & Economics
Languages : en
Pages : 408
Book Description
A comprehensive and enlightening journey through the past, present and future of option pricing.
Publisher:
ISBN: 9781899332663
Category : Business & Economics
Languages : en
Pages : 408
Book Description
A comprehensive and enlightening journey through the past, present and future of option pricing.
A Time Series Approach to Option Pricing
Author: Christophe Chorro
Publisher:
ISBN: 9783662450383
Category :
Languages : en
Pages : 206
Book Description
Publisher:
ISBN: 9783662450383
Category :
Languages : en
Pages : 206
Book Description
Option Pricing Under Transation Costs
Black Scholes and Beyond: Option Pricing Models
Author: Neil Chriss
Publisher: McGraw-Hill
ISBN:
Category : Business & Economics
Languages : en
Pages : 512
Book Description
An unprecedented book on option pricing! For the first time, the basics on modern option pricing are explained ``from scratch'' using only minimal mathematics. Market practitioners and students alike will learn how and why the Black-Scholes equation works, and what other new methods have been developed that build on the success of Black-Shcoles. The Cox-Ross-Rubinstein binomial trees are discussed, as well as two recent theories of option pricing: the Derman-Kani theory on implied volatility trees and Mark Rubinstein's implied binomial trees. Black-Scholes and Beyond will not only help the reader gain a solid understanding of the Balck-Scholes formula, but will also bring the reader up to date by detailing current theoretical developments from Wall Street. Furthermore, the author expands upon existing research and adds his own new approaches to modern option pricing theory. Among the topics covered in Black-Scholes and Beyond: detailed discussions of pricing and hedging options; volatility smiles and how to price options ``in the presence of the smile''; complete explanation on pricing barrier options.
Publisher: McGraw-Hill
ISBN:
Category : Business & Economics
Languages : en
Pages : 512
Book Description
An unprecedented book on option pricing! For the first time, the basics on modern option pricing are explained ``from scratch'' using only minimal mathematics. Market practitioners and students alike will learn how and why the Black-Scholes equation works, and what other new methods have been developed that build on the success of Black-Shcoles. The Cox-Ross-Rubinstein binomial trees are discussed, as well as two recent theories of option pricing: the Derman-Kani theory on implied volatility trees and Mark Rubinstein's implied binomial trees. Black-Scholes and Beyond will not only help the reader gain a solid understanding of the Balck-Scholes formula, but will also bring the reader up to date by detailing current theoretical developments from Wall Street. Furthermore, the author expands upon existing research and adds his own new approaches to modern option pricing theory. Among the topics covered in Black-Scholes and Beyond: detailed discussions of pricing and hedging options; volatility smiles and how to price options ``in the presence of the smile''; complete explanation on pricing barrier options.
A Practical Approach to Option Pricing Theory
Author: H. Page
Publisher:
ISBN:
Category : Options (Finance)
Languages : en
Pages : 75
Book Description
Publisher:
ISBN:
Category : Options (Finance)
Languages : en
Pages : 75
Book Description
A Disturbance Attenuatin Approach to Option Pricing with Transaction Costs
Author: Lihui Zheng
Publisher:
ISBN:
Category : Investment analysis
Languages : en
Pages : 52
Book Description
Publisher:
ISBN:
Category : Investment analysis
Languages : en
Pages : 52
Book Description
Working Paper 90-29. A Simple Approach to Interest Rate Option Pricing
Author: Queen's University. School of Business. Research Program
Publisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
Publisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
Option Pricing
Author: Robert A. Jarrow
Publisher: McGraw-Hill/Irwin
ISBN:
Category : Business & Economics
Languages : en
Pages : 268
Book Description
Publisher: McGraw-Hill/Irwin
ISBN:
Category : Business & Economics
Languages : en
Pages : 268
Book Description