We study European options on the ratio of the stock price to its average and vice versa. Some of these options have been traded in the Australian Stock Exchange since 1992, thus we call them Australian options. For geometric averages, we obtain closed-form expressions for option prices. For...

<title>Abstract</title> We propose a valuation framework for pricing European call warrants on the issuer’s own stock that allows for debt in the issuer firm. In contrast to other works that also price warrants with dilution issued by levered firms, ours uses only observable variables. Thus, we extend the...

Gu [Gu, Y. A. (2002). Valuing the option to purchase an asset at a proportional discount. The Journal of Financial Research, 25 (1), 99-109] introduces proportional-strike options to study a residential real estate program in China. Under this program, a state employee can buy her house at a...

This chapter analyzes the empirical performance of alternative option pricing models using Black and Scholes (1973) as a benchmark. Specifically, we consider the Heston (1993) and Corrado and Su (1996) models and price call options on the S&amp;P 500 index over the period from November 2010 to April...