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Oil Volatility and the Option Value of Waiting : An Analysis of the G-7

Bredin, Don - 2011

There has recently been considerable interest in the potential adverse effects associated with excessive uncertainty in energy futures markets. Theoretical models of investment under uncertainty predict that increased uncertainty will tend to induce firms to delay production and investment....

Persistent link: https://www.econbiz.de/10013133512

Hedging the Counterparty Credit Risk of an Oil Company with Oil Futures Using Dynamic GARCH – A Derivative's Approach to Right-Way Risk

Lehrbass, Frank - 2014

If the creditworthiness of a counterparty is a derivative of a commodity price, there is the potential to have right- or wrong-way exposures in respective commodity transaction. Identifying them is important, because otherwise credit costs might be inadequately calculated and wrong incentives...

Persistent link: https://www.econbiz.de/10013061102

The Cost Model for Deriving Implied Volatility Surfaces

Eid, Gilbert - 2012

volatility surfaces. The parameters of this model are directly linked to measurable and observable market risks …

Persistent link: https://www.econbiz.de/10013116347

Time-Changed Lévy Jump Processes with GARCH Model on Reverse Convertibles

Simi, Ph.D., Wei - 2013

Over decades, investors are more incline to pursue high-yield financial investment instruments at low interest rates economic environments. The increasing demand of high-yield products has given financial institutions the opportunities to create financial structured products. Reverse convertible...

Persistent link: https://www.econbiz.de/10013089814

Pricing Forward Skew Dependent Derivatives : Multifactor Versus Single-Factor Stochastic Volatility Models

Marabel Romo, Jacinto - 2014

volatility level. Single-factor stochastic volatility models are not flexible enough to account for the stochastic behavior of … the skew. On the other hand, multifactor stochastic volatility models are able to account for the existence of stochastic … that the consideration of additional volatility factors in the context of stochastic volatility models allows us to …

Persistent link: https://www.econbiz.de/10013064470

The Valuation of No-Negative Equity Guarantees and Equity Release Mortgages

Dowd, Kevin - 2020

We outline the valuation process for a No-Negative Equity Guarantee in an Equity Release Mortgage loan and for an Equity Release Mortgage that has such a guarantee. Illustrative valuations are provided based on the Black '76 put pricing formula and mortality projections based on the M5, M6 and...

Persistent link: https://www.econbiz.de/10012839794

A simple method for extracting the probability of default from American put option prices

Chang, Bo Young; Orosi, Greg - 2020 - Last updated: April 20, 2020

In this paper, we present a novel method to extract the risk-neutral probability of default of a firm from American put option prices. Building on the idea of a default corridor proposed in Carr and Wu (2011), we derive a parsimonious closed-form formula for American put option prices from which...

Persistent link: https://www.econbiz.de/10012216226

Dynamic Investment, Capital Structure, and Debt Overhang

Sundaresan, Suresh M.; Wang, Neng - 2011

We model dynamic investment, financing and default decisions of a firm, which begins its life with a collection of growth options. The firm exercises them optimally over time, and finances the costs of investment by trading off tax benefits of debt with both distress costs and agency costs of...

Persistent link: https://www.econbiz.de/10014026469

Fundamentals of Futures and Options

Clarke, Roger G - 2015

Derivative securities and markets have experienced tremendous worldwide growth since 1970. But even so, they are not always well understood. To remedy this situation, the authors explain the link between options and futures and the underlying security or index from which they ultimately derive...

Persistent link: https://www.econbiz.de/10013021343

Vanilla Equity Options and Greeks Revisited

Wamba, Warren - 2018

Today there are many equity derivatives that are traded on organized and over-the-counter markets. The models that allow market participants to value them and manage the associated risks on a daily basis are numerous. The idea of this study is, for vanilla equity options, to understand the Black...

Persistent link: https://www.econbiz.de/10012916312