Download or read book A Disturbance Attenuatin Approach to Option Pricing with Transaction Costs written by Lihui Zheng and published by . This book was released on 2000 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Stochastic Dominance Option Pricing written by Stylianos Perrakis and published by Springer. This book was released on 2019-05-03 with total page 277 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book illustrates the application of the economic concept of stochastic dominance to option markets and presents an alternative option pricing paradigm to the prevailing no arbitrage simultaneous equilibrium in the frictionless underlying and option markets. This new methodology was developed primarily by the author, working independently or jointly with other co-authors, over the course of more than thirty years. Among others, it yields the fundamental Black-Scholes-Merton option value when markets are complete, presents a new approach to the pricing of rare event risk, and uncovers option mispricing that leads to tradeable strategies in the presence of transaction costs. In the latter case it shows how a utility-maximizing investor trading in the market and a riskless bond, subject to proportional transaction costs, can increase his/her expected utility by overlaying a zero-net-cost portfolio of options bought at their ask price and written at their bid price, irrespective of the specific form of the utility function. The book contains a unified presentation of these methods and results, making it a highly readable supplement for educators and sophisticated professionals working in the popular field of option pricing. It also features a foreword by George Constantinides, the Leo Melamed Professor of Finance at the Booth School of Business, University of Chicago, USA, who was a co-author in several parts of the book.

Download or read book Theory of Continously sampled Asian Option Pricing written by Jin E. Zhang and published by . This book was released on 2000 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Option Pricing Under Transaction Costs written by Huyên Pham and published by . This book was released on 1996 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Options Pricing with Transaction Costs written by Jennifer (Bo) Liang and published by . This book was released on 1997 with total page 148 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Asset Pricing Model with Robust Control written by Eric Full-yet Lam and published by . This book was released on 2003 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Option Pricing and Hedging with Transaction Costs written by Ling Chen and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The traditional Black-Scholes theory on pricing and hedging of European call options has long been criticized for its oversimplified and unrealistic model assumptions. This dissertation investigates several existing modifications and extensions of the Black-Scholes model and proposes new data-driven approaches to both option pricing and hedging for real data. The semiparametric pricing approach initially proposed by Lai and Wong (2004) provides a first attempt to bridge the gap between model and market option prices. However, its application to the S & P 500 futures options is not a success, when the original additive regression splines are used for the nonparametric part of the pricing formula. Having found a strong autocorrelation in the time-series of the Black-Scholes pricing residuals, we propose a lag-1 correction for the Black-Scholes price, which essentially is a time-series modeling of the nonparametric part in the semiparametric approach. This simple but efficient time-series approach gives an outstanding pricing performance for S & P 500 futures options, even compared with the commonly practiced and favored implied volatility approaches. A major type of approaches to option hedging with proportional transaction costs is based on singular stochastic control problems that seek an optimal balance between the cost and the risk of hedging an option. We propose a data-driven rule-based strategy to connect the theoretical approaches with real-world applications. Similar to the optimal strategies in theory, the rule-based strategy can be characterized by a pair of buy/sell boundaries and a no-transaction region in between. A two-stage iterative procedure is provided for tuning the boundaries to a long period of option data. Comparing the rule-based strategy with several other existing hedging strategies, we obtain favorable results in both the simulation studies and the empirical study using the S & P 500 futures and futures options. Making use of a reverting pattern of the S & P 500 futures price, we refine the rule-based strategy by allowing hedging suspension at large jumps in futures price.

Download or read book Option Pricing in the Presence of Transaction Costs written by Christopher John Danielian and published by . This book was released on 1997 with total page 104 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Option Pricing and Hedging in the Presence of Transaction Costs and Nonlinear Partial Differential Equations written by Valeriy Zakamulin and published by . This book was released on 2008 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the presence of transaction costs the perfect option replication is impossible which invalidates the celebrated Black and Scholes (1973) model. In this chapter we consider some approaches to option pricing and hedging in the presence of transaction costs. The distinguishing feature of all these approaches is that the solution for the option price and hedging strategy is given by a nonlinear partial differential equation (PDE). We start with a review of the Leland (1985) approach which yields a nonlinear parabolic PDE for the option price, one of the first such in finance. Since the Leland's approach to option pricing has been criticized on different grounds, we present a justification of this approach and show how the performance of the Leland's hedging strategy can be improved. We extend the Leland's approach to cover the pricing and hedging of options on commodity futures contracts, as well as path-dependent and basket options. We also present examples of finite-difference schemes to solve some nonlinear PDEs. Then we proceed to the review of the most successful approach to option hedging with transaction costs, the utility-based approach pioneered by Hodges and Neuberger (1989). Judging against the best possible tradeoff between the risk and the costs of a hedging strategy, this approach seems to achieve excellent empirical performance. The asymptotic analysis of the option pricing and hedging in this approach reveals that the solution is also given by a nonlinear PDE. However, this approach has one major drawback that prevents the broad application of this approach in practice, namely, the lack of a closed-form solution. The numerical computations are cumbersome to implement and the calculations of the optimal hedging strategy are time consuming. Using the results of asymptotic analysis we suggest a simplified parameterized functional form of the optimal hedging strategy for either a single option or a portfolio of options and a method for finding the optimal parameters.

Download or read book The ASEAN 3 Trading Bloc written by Yum-Keung Kwan and published by . This book was released on 2003 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Trade Theory and the Role of Time Zones written by Sugata Marjit and published by . This book was released on 2005 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Accession Rules and Trade Agreements written by Eric W. Bond and published by . This book was released on 2002 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Central Bank Intervention and Properties of the 1920s Currency Markets written by Richard Baillie and published by . This book was released on 2002 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Option Pricing with Transaction Costs and Stochastic Volatility written by Emmanuel Kengni Ncheuguim and published by . This book was released on 2011 with total page 118 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Liquidity Premium in a Credit Constrained Environment written by Claudian Siu-kit Kwok and published by . This book was released on 2003 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Stochastic Dominance Bounds on Option Prices in the Presence of Transaction Costs written by Michal Czerwonko and published by . This book was released on 2002 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the multi-period upper bound on the European call price in the presence of transaction costs derived by Constantinides-Perrakis (2002). Numerical results verifying an assumption of the monotonictity of wealth of the call writer in the underlying asset on which the Constantinides-Perrakis (2002) model relies are derived, and it is shown that the assumption is satisfied for relatively small ratios of stock to option account. The classic second order stochastic dominance argument is applied to the dynamic trading in discrete time in the S & P 500 options under the portfolio selection criteria in the presence of transaction costs. It is shown that the improvement in expected utility does occur under the prescribed investment policy in the S & P 500 calls whose prices exceed the bound. Under the lognormality of the S & P 500 price process, the quantitative improvement in expected utility is derived.

Download or read book A Game theoretic Analysis of China s WTO Accession written by Eric W. Bond and published by . This book was released on 2002 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: