The Duan Options Pricing Model is an alternative to the Black & Scholes Model (B&S), but considers the heteroskedasticity and the non-normality of the asset-returns. This study analyzes the performance and the characteristics of this model when applied to the Brazilian market, specifically on...

Options strategies are combinations of transactions involving options on the same underlying asset or simultaneous positions on those derivatives assets and the underlying asset. Such transactions create new investment opportunities and different risk exposures, leading to specific capital...

The Value at Risk calculation for options has a lot of difficulties. The non-normality and the non-linearity of these assets cause sufficient unaccuracy in this measurement, mainly for the parametric models. The purpose of this article is to analyze the results of the VaR estimate for a...

Although not explicitly reported, option traders on the Bovespa exchange pay an implicit bid-ask spread on each trade. Reported transaction prices that comprise the databases previously used to study the Brazilian options markets do not reflect actual option values at the time of the trades, but...

The importance of risk management has been highlighted by the series of disasters related to the application of derivatives and by the common sense in needing to cover these operations with capital allocation. However, not much agreement exists concerning the methods for calculating the capital...

This study analyzes the adverse selection cost component embedded in the spreads of Brazilian stocks. We show that it is higher than in the U.S. market and presents an intraday U-shape pattern (i.e., it is higher at the beginning and at the end of the day). In addition, we investigate the...