Search Results - subject:"Exotic options"

Information-neutral hedging of derivatives under market impact and manipulation risk

Alimoradian, Behzad; Barigou, Karim; Eyraud, Anne - 2026

The literature on derivative pricing in illiquid markets has mostly focused on computing optimal hedging controls, but empirical microstructure studies show that large order flow generates persistent and predictable price effects. Therefore, these controls can themselves induce endogenous market...

Persistent link: https://www.econbiz.de/10015591116

In search of seasonality in intraday and overnight option returns

Bali, Turan G.; Goyal, Amit; Mörke, Mathis; Weigert, … - 2026

We uncover momentum and reversal patterns in half-day option returns that persist for up to at least 20 business days, with economic magnitudes of 0.22% to 0.45% per half-day. Specifically, returns show strong momentum within the same period (e.g., intraday-to-intraday) but reverse sharply...

Persistent link: https://www.econbiz.de/10015591093

Study on the validity of volatility trading

Castillo, Alberto; Mcwilliams, Jose Manuel Mira - 2026

This study examines the role of volatility mean reversion in option pricing and evaluates the performance of commonly used volatility estimators within a broad market context. Using a comprehensive dataset of end-of-day option chains for the 100 most actively traded U.S. equities from 2018 to...

Persistent link: https://www.econbiz.de/10015628389

Hidden optionalities in American options

El Hassan, Noura; Maddah, Bacel; Taleb, Nassim Nicholas - 2026

We develop a practical framework for identifying and quantifying the hidden layers of risks and optionality embedded in American options by introducing stochasticity into one or more of their underlying determinants. The heuristic approach remedies the problems of conventional pricing systems,...

Persistent link: https://www.econbiz.de/10015640263

Characteristic function-based factor modeling of affine jump-diffusions using options

Boswijk, Herman Peter; Laeven, Roger J. A.; Marijnen, Niels - 2026

We develop a framework to analyze option markets using factor modeling techniques, offering a novel method to study how many and which risk factors drive the price process of a single asset. We exploit information contained in option prices to construct observations on the characteristic...

Persistent link: https://www.econbiz.de/10015656743

Analytical valuation of a general form of barrier option with stochastic interest rate and jumps

Guillaume, Tristan - 2025

Persistent link: https://www.econbiz.de/10015440659

A Bayesian stochastic discount factor for the cross-section of individual equity options

Käfer, Niclas; Mörke, Mathis; Weigert, Florian; … - 2025 - This version: April 23, 2024

We utilize Bayesian model averaging to estimate a stochastic discount factor (SDF) for single-stock options. A Bayesian model averaging SDF outperforms reduced-form benchmark models in-sample and out-of-sample in pricing option return anomalies and portfolios. We document that the SDF is dense...

Persistent link: https://www.econbiz.de/10015204018

Valuation of American options using machine learning : beyond Longstaff-Schwartz and hybrid models

Vivas-Redondo, Maria; Coronado-Vaca, María; … - 2025

This work explores the potential of different machine learning (ML) algorithms in the valuation of American options (Aos), contrasting them with the Longstaff-Schwartz (L-S) model. To carry out this research, the algorithms K-Nearest Neighbors (KNN), Random Forest (RF), Multi-Layer Perceptron...

Persistent link: https://www.econbiz.de/10015549107

Unraveling COVID-19-induced volatility spillover : a study of the dynamic interplay between NIFTY 50 spot and options markets

Tokas, Nisha; Gahlot, Ruchika; Puri, Neha; Gupta, Himani; … - 2025

This study unravels the transmission of volatility spillovers between NIFTY 50 spot prices and the options market, addressing a significant gap in existing studies. It captures how market connectedness evolved during the pre-COVID, COVID and post-COVID periods, offering fresh insights into price...

Persistent link: https://www.econbiz.de/10015549125

Valuing catastrophe equity put options with liquidity risk, default risk and jumps

Tang, Chao; Chen, Peimin; Zhang, Shu - 2025

Persistent link: https://www.econbiz.de/10015372584