Showing 1 - 10 of 21,687
Persistent link: https://www.econbiz.de/10005125065
Motivated by the changing nature of the natural gas industry in the European Union driven by the liberalization process, we focus on pricing of gas swing options. These options are embedded in typical gas sales agreements in the form of offtake flexibility concerning volume and time. The gas...
Persistent link: https://www.econbiz.de/10009152601
This paper applies to the static hedge of barrier options a technique, mean-square hedging, designed to minimize the size of the hedging error when perfect replication is not possible. It introduces an extension of this technique which preserves the computational efficiency of mean-square...
Persistent link: https://www.econbiz.de/10009725021
This paper examines the pricing of options by approximating extensions of the Black-Scholes setup in which volatility follows a separate diffusion process. It gereralizes the well-known binomial model, constructing a discrete two-dimensional lattice. We discuss convergence issues extensively and...
Persistent link: https://www.econbiz.de/10004968228
Viewing binomial models as a discrete approximation of the respective continuous models, the interest focuses on the notions of convergence and especially "fast" convergence of prices. Though many authors were proposing new models, none of them could successfully explain better performance for...
Persistent link: https://www.econbiz.de/10004968298
Binomial models, which rebuild the continuous setup in the limit, serve for approximative valuation of options, especially where formulas cannot be derived mathematically. Even with the valuation of European call options distorting irregularities occur. For this case, sources of convergence...
Persistent link: https://www.econbiz.de/10004968315
Investment behaviour, techniques and choices have evolved in the options markets since the launch of options trading in 1973. Today, we are entering the field of Big Data and the explosion of information, which has become the main feature of science, impacts investors' decisions and their...
Persistent link: https://www.econbiz.de/10012115106
This paper develops a new approach for variance trading. We show that the discretely-sampled realized variance can be robustly replicated under very general conditions, including when the price can jump. The replication strategy specifies the exact timing for rebalancing in the underlying. The...
Persistent link: https://www.econbiz.de/10010795335
This paper studies the "overpriced puts puzzle" — the finding that historical prices of the S&P 500 put options have been too high and incompatible with the canonical asset-pricing models. To investigate whether put returns could be rationalized by another, possibly non-standard equilibrium...
Persistent link: https://www.econbiz.de/10011078374
We analyze the impact of funding costs and margin requirements on prices of index options traded on the CBOE. We propose a model that gives upper and lower bounds for option prices in the absence of arbitrage in an incomplete market with differential borrowing and lending rates. We show that...
Persistent link: https://www.econbiz.de/10009375107