Narrow search
Showing 1 - 10 of 20
Cover Image
Monte Carlo option pricing with asymmetric realized volatility dynamics
Allen, David E.; McAleer, Michael; Scharth, Marcel - In: Mathematics and Computers in Simulation (MATCOM) 81 (2011) 7, pp. 1247-1256
significantly smaller pricing errors when compared to models of the GARCH family. Most importantly, our results indicate that the …
Persistent link: https://www.econbiz.de/10010869946
Cover Image
Using the continuous price as control variate for discretely monitored options
Dingeç, Kemal Dinçer; Hörmann, Wolfgang - In: Mathematics and Computers in Simulation (MATCOM) 82 (2011) 4, pp. 691-704
Variance reduction is of highest importance in financial simulation. In this study, we present a new and simple variance reduction technique for pricing discretely monitored lookback and barrier options. It is based on using the corresponding continuously monitored option as external control...
Persistent link: https://www.econbiz.de/10011050644
Cover Image
A consistent stable numerical scheme for a nonlinear option pricing model in illiquid markets
Company, Rafael; Jódar, Lucas; Pintos, José-Ramón - In: Mathematics and Computers in Simulation (MATCOM) 82 (2012) 10, pp. 1972-1985
Markets liquidity is an issue of very high concern in financial risk management. In a perfect liquid market the option pricing model becomes the well-known linear Black–Scholes problem. Nonlinear models appear when transaction costs or illiquid market effects are taken into account. This paper...
Persistent link: https://www.econbiz.de/10011050870
Cover Image
Jump diffusion model with application to the Japanese stock market
Maekawa, Koichi; Lee, Sangyeol; Morimoto, Takayuki; … - In: Mathematics and Computers in Simulation (MATCOM) 78 (2008) 2, pp. 223-236
In this paper we demonstrate that a jump diffusion model is better fitted to Japanese stock data in the Nikkei 225 than the classical Black–Scholes (BS) model. In order to check the existence of jumps, we implement the bipower test by Barndorff-Nielsen and Shephard [O.E. Barndorff-Nielsen, N....
Persistent link: https://www.econbiz.de/10010748745
Cover Image
Option pricing under the Merton model of the short rate
Kung, James J.; Lee, Lung-Sheng - In: Mathematics and Computers in Simulation (MATCOM) 80 (2009) 2, pp. 378-386
Previous option pricing research typically assumes that the risk-free rate or the short rate is constant during the life of the option. In this study, we incorporate the stochastic nature of the short rate in our option valuation model and derive explicit formulas for European call and put...
Persistent link: https://www.econbiz.de/10010749211
Cover Image
Constant elasticity of variance (CEV) option pricing model: Integration and detailed derivation
Hsu, Y.L.; Lin, T.I.; Lee, C.F. - In: Mathematics and Computers in Simulation (MATCOM) 79 (2008) 1, pp. 60-71
In this paper we review the renowned constant elasticity of variance (CEV) option pricing model and give the detailed derivations. There are two purposes of this article. First, we show the details of the formulae needed in deriving the option pricing and bridge the gaps in deriving the...
Persistent link: https://www.econbiz.de/10010749821
Cover Image
A smooth estimator for MC/QMC methods in finance
Han, Chuan-Hsiang; Lai, Yongzeng - In: Mathematics and Computers in Simulation (MATCOM) 81 (2010) 3, pp. 536-550
We investigate the effect of martingale control as a smoother for MC/QMC methods. Numerical results of estimating low-biased solutions for American put option prices under the Black–Scholes model demonstrate that using QMC methods can be problematic. But it can be fixed by adding a (local)...
Persistent link: https://www.econbiz.de/10010750228
Cover Image
Estimating m-regimes STAR-GARCH model using QMLE with parameter transformation
Chan, Felix; Theoharakis, Billy - In: Mathematics and Computers in Simulation (MATCOM) 81 (2011) 7, pp. 1385-1396
-Generalized Autoregressive Conditional Heteroskedasticity (STAR-GARCH) can be problematic due to computational difficulties. Conventional … makes Quasi-Maximum Likelihood Estimator (QMLE) difficult to obtain for STAR-GARCH models in practice. Curiously, there has … STAR-GARCH using QMLE. The aim of the paper is to investigate the nature of the numerical difficulties using Monte Carlo …
Persistent link: https://www.econbiz.de/10010869931
Cover Image
The pricing of options for securities markets with delayed response
Kazmerchuk, Yuriy; Swishchuk, Anatoliy; Wu, Jianhong - In: Mathematics and Computers in Simulation (MATCOM) 75 (2007) 3, pp. 69-79
delayed response is derived. A special case of continuous-time version of GARCH is considered. The results are compared with …
Persistent link: https://www.econbiz.de/10010870462
Cover Image
Modelling the asymmetric volatility of electronics patents in the USA
Chan, Felix; Marinova, Dora; McAleer, Michael - In: Mathematics and Computers in Simulation (MATCOM) 64 (2004) 1, pp. 169-184
the symmetric AR(1)-GARCH(1, 1), the asymmetric AR(1)-GJR(1, 1), and asymmetric AR(1)-EGARCH(1, 1). Of these, the …
Persistent link: https://www.econbiz.de/10011050523