Showing 1 - 10 of 57
This is the first paper to provide a simple, explicit formula (that doesn’t requirenumerical/computational methods) under stochastic volatility. The formulais as simple as the classical Black-Scholes pricing formula. Furthermore,this paper modifies the Black-Scholes model to make it consistent...
Persistent link: https://www.econbiz.de/10013247571
We overcome a long-standing obstacle in statistics. In doing so, we show that the distribution of the sum of log-normal variables is log-normal. Furthermore, we offer a breakthrough result in finance. In doing so, we introduce a simple, exact and explicit formula for pricing the arithmetic Asian...
Persistent link: https://www.econbiz.de/10012847738
We introduce a simple, explicit formula for pricing the Bermudan options. Furthermore, the formula does not require any additional parameter (relative to the European option formula). Moreover, we provide an upper bound for the price
Persistent link: https://www.econbiz.de/10012848338
In this paper, we show that the influential Merton jump diffusion model and formula are needlessly cumbersome. In doing so, we provide a simple, explicit formula that doesn't require a computational method. Furthermore, we introduce a new, simple method for solving partial...
Persistent link: https://www.econbiz.de/10012848753
This paper explores the impact of volatility estimation methods on theoretical option values based upon the Black-Scholes-Merton (BSM) model. Volatility is the only input used in the BSM model that cannot be observed in the market or a priori determined in a contract. Thus, properly calculating...
Persistent link: https://www.econbiz.de/10014159317
This work analyses the common industry practice used to evaluate financial options written on with-profit policies issued by European insurance companies.In the last years regulators introduced, with the Solvency II directive, a market consistent valuation framework for determining the fair...
Persistent link: https://www.econbiz.de/10012967367
We devise a method to circumvent the complexity that arises from the option multi-dimensionality. That is, we transform the model to make it as simple as the one-dimensional case. Furthermore, the assumption of comonotonicity and other assumptions regarding the structure of the underlying asset...
Persistent link: https://www.econbiz.de/10013238065
Persistent link: https://www.econbiz.de/10013107546
In this paper we investigate the use of finite difference and finite element schemes when applied to the valuation of exotic options characterized by discontinuities in the payoff function. In particular, we will conduct a numerical analysis of several common schemes in order to give a better...
Persistent link: https://www.econbiz.de/10013084288
We develop a multivariate Lévy model and apply the bivariate model for the pricing of quanto options that captures three characteristics observed in real-world markets for stock prices and currencies: jumps, heavy tails and skewness. The model is developed by using a bottom-up approach from a...
Persistent link: https://www.econbiz.de/10012935989