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1987
Financial contracting is as old as human history. Deeds for the sale of land have been discovered that date to before 2800 bc. The Code of Hammurabi (c1800 bc) regulated, among other things, the terms of credit. Contingent contracting was also common.
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Financial contracting is as old as human history. Deeds for the sale of land have been discovered that date to before 2800 bc. The Code of Hammurabi (c1800 bc) regulated, among other things, the terms of credit. Contingent contracting was also common.
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SSRN Electronic Journal, 2017
Derivatives pricing models based on arbitrage produce a single no-arbitrage option value. In theory, trading by arbitrageurs will force the market price to equal this value. However, the real world is full of frictions and uncertainty, and there is always a range in which the market price may wander without becoming sufficiently mispriced to touch off ...
Wim Schoutens, Dilip B. Madan
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Derivatives pricing models based on arbitrage produce a single no-arbitrage option value. In theory, trading by arbitrageurs will force the market price to equal this value. However, the real world is full of frictions and uncertainty, and there is always a range in which the market price may wander without becoming sufficiently mispriced to touch off ...
Wim Schoutens, Dilip B. Madan
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2017
Several calculations assist in identifying price advantage in options contracts. These include put/call parity as a means for selecting synthetic and straddle trades. A second calculation identifies upper and lower bounds, a means for identifying finite risk levels. In pricing options, three elements of price each contain different features.
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Several calculations assist in identifying price advantage in options contracts. These include put/call parity as a means for selecting synthetic and straddle trades. A second calculation identifies upper and lower bounds, a means for identifying finite risk levels. In pricing options, three elements of price each contain different features.
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2003
Publisher Summary This chapter explains how the Black and Scholes (B&S) model can be applied and will develop alternative pricing approaches: lattice frameworks and Monte Carlo simulation. It considers and explains several frameworks that are available for the calculation of option premia.
Brian A. Eales, Moorad Choudhry
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Publisher Summary This chapter explains how the Black and Scholes (B&S) model can be applied and will develop alternative pricing approaches: lattice frameworks and Monte Carlo simulation. It considers and explains several frameworks that are available for the calculation of option premia.
Brian A. Eales, Moorad Choudhry
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1996
Abstract The first section of this chapter discusses the basic features of option contracts, with special reference to stock options, including the way in which the contractual elements of an option (such as the maturity or exercise price) have been standardized to facilitate trading.
Hendrik S. Houthakker +1 more
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Abstract The first section of this chapter discusses the basic features of option contracts, with special reference to stock options, including the way in which the contractual elements of an option (such as the maturity or exercise price) have been standardized to facilitate trading.
Hendrik S. Houthakker +1 more
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Multifactor option pricing: pricing bounds and option relations
International Journal of Applied Decision Sciences, 2010Multifactor models are popular in industry and research but suffer from unstable weightings (similar to the problem encountered in multiple regressions). Consequently this poses an option pricing problem as prices can change significantly depending on these unstable weightings.
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Journal of Financial Economics, 1976
Abstract Recent advances in the general equilibrium pricing of simple put and call options lay the foundation for the development of a general theory of the valuation of contingent claims assets. This paper provides a review of: (1) the development of the general equilibrium option pricing model by Black and Scholes, and the subsequent modifications ...
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Abstract Recent advances in the general equilibrium pricing of simple put and call options lay the foundation for the development of a general theory of the valuation of contingent claims assets. This paper provides a review of: (1) the development of the general equilibrium option pricing model by Black and Scholes, and the subsequent modifications ...
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OPTION PRICING BOUNDS AND THE PRICING OF BOND OPTIONS
Journal of Business Finance & Accounting, 1996Jørgen Aase Nielsen +1 more
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2002
The evolution of uncertainty over time can be conceptualized and modelled as a mathematical expression, known as a stochastic process, which describes the evolution of a random variable over time. Models of asset price behaviour for pricing derivatives are formulated in a continuous time framework by assuming a stochastic differential equation (SDE ...
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The evolution of uncertainty over time can be conceptualized and modelled as a mathematical expression, known as a stochastic process, which describes the evolution of a random variable over time. Models of asset price behaviour for pricing derivatives are formulated in a continuous time framework by assuming a stochastic differential equation (SDE ...
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2002
We use spreadsheets to illustrate the concepts and techniques of arbitrage-free option pricing. We show how to implement both discrete (binomial) models and continuous (Black-Scholes) models, discuss similarities and differences in the required computational methods, and investigate issues of a practical nature, such as parameter estimation/uncertainty
Honore, Peter, Poulsen, Rolf
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We use spreadsheets to illustrate the concepts and techniques of arbitrage-free option pricing. We show how to implement both discrete (binomial) models and continuous (Black-Scholes) models, discuss similarities and differences in the required computational methods, and investigate issues of a practical nature, such as parameter estimation/uncertainty
Honore, Peter, Poulsen, Rolf
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