To cope with the negative oil futures price caused by the COVID-19 recession, global commodity futures exchanges switched the option model from Black-Scholes to Bachelier in April 2020. This study reviews the literature on Bachelier's pioneering option pricing model and summarizes the practical...

We show that the slope of the volatility decile portfolio's return profile contains valuable information that can be used to time volatility under different market conditions. During good (bad) market condition, the high- (low-) volatility portfolio produces the highest return. We proceed to...

We propose a model-independent method to account for the early exercise premiums in American options on non-dividend paying stocks. We find that our estimates of early exercise premium are generally larger than the estimates by existing methods. Given the American options on the Exchange-Traded...

The authors show that risk aversion and prior estimation error input parameters of the Black-Litterman model that are arbitrarily fixed in existing practices should instead be carefully calibrated as they are related to Sharpe performance ratio and Value-at-Risk or tail risk of the active...