We examine arithmetic Brownian motion as an alternative framework for option valuation and related tasks. After reexamining empirical evidence, we compare and contrast option valuation based on geometric Brownian motion and arithmetic Brownian motion. We identify an alternative way to handle...

A general option-based approach to estimating the discount for lack of marketability is offered. It is general enough to capture maturity, volatility, hedging availability, and investor skill as well as other important factors. The model is shown to contain the Chaffe model, the Longstaff model,...

This paper derives accurate inferences about the contribution of a high-dimensional set of option and stock characteristics to the cross-sectional variation in delta-hedged option returns. Unlike the extant literature that is largely focused on the construction of predictive models, we apply...