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Evaluation of options using the Monte Carlo method and the entropy of information

Brătian, Vasile - In: Expert journal of economics 6 (2018) 2, pp. 35-43

options using the Monte Carlo method and the measurement of the entropy of information for the price of the underlying asset … is made using the Feynman-Kač theorem. The distribution we use is lognormal. Also, in the paper is measured the entropy … of information of Shannon type. The measurement of the entropy of information of the stock market price of the underlying …

Persistent link: https://www.econbiz.de/10012062932

A New Approach to Minimal Variance Hedging of European Options (Part 2 : The Pure-Jump Case)

Hess, Markus - 2021

This paper addresses the following question: How can a financial institution, which has issued a European option, optimally hedge the payoff of this option by investing into the underlying stock and into the option itself? Here, optimality is measured in terms of minimal variance and the...

Persistent link: https://www.econbiz.de/10013236503

A New Approach to Minimal Variance Hedging of European Options (Part 1 : The Brownian Motion Case)

Hess, Markus - 2021

Persistent link: https://www.econbiz.de/10013237327

Path Dependent Optimal Transport and Model Calibration on Exotic Derivatives

Guo, Ivan - 2019

In this paper, we introduce and develop the theory of semimartingale optimal transport in a path dependent setting. Instead of the classical constraints on marginal distributions, we consider a general framework of path dependent constraints. Duality results are established, representing the...

Persistent link: https://www.econbiz.de/10012896686

Optimal Hedging Strategies for Options in Electricity Futures Markets

Hess, Markus - 2021

In this paper, we derive optimal hedging strategies for options in electricity futures markets. Optimality is measured in terms of minimal variance and the associated minimal variance hedging portfolios are obtained by a stochastic maximum principle. Our explicit results are particularly useful...

Persistent link: https://www.econbiz.de/10013232821

Improved Methods for Implied Volatility Surface and Implied Distributions

Lim, Hyuncheul - 2020

We present a highly mechanical method for the construction of implied volatility surface and implied transition probability density function that satisfies the no arbitrage condition(NAC) under missing data environment. This paper assumes a Dupire's model which is a simple extension of the...

Persistent link: https://www.econbiz.de/10012838747

A New Method of Employing the Principle of Maximum Entropy to Retrieve the Risk Neutral Density

Rompolis, Leonidas - 2017

This paper suggests a new method of implementing the principle of maximum entropy to retrieve the risk neutral density … previous studies, the method maximizes the entropy measure subject to values of the risk neutral moments. These moments can be … risk neutral density based on the principle of maximum entropy, the benefits of the method that the paper suggests is the …

Persistent link: https://www.econbiz.de/10014224966

Updating the option implied probability of default methodology

Vilsmeier, Johannes - 2014

In this paper we ‘update’ the option implied probability of default (option iPoD) approach recently suggested in the literature. First, a numerically more stable objective function for the estimation of the risk neutral density is derived whose integrals can be solved analytically. Second,...

Persistent link: https://www.econbiz.de/10010471968

Updating the option implied probability of default methodology

Vilsmeier, Johannes - 2011

. -- option implied probability of default ; risk neutral density ; cross entropy …

Persistent link: https://www.econbiz.de/10009313603

Updating the Option Implied Probability of Default Methodology

Vilsmeier, Johannes - 2016

In this paper we 'update' the option implied probability of default (option iPoD) approach recently suggested in the literature. First, a numerically more stable objective function for the estimation of the risk neutral density is derived whose integrals can be solved analytically. Second, it is...

Persistent link: https://www.econbiz.de/10012988705