Download or read book The Valuation of American Options with Stochastic Interest Rates written by Teng Suan Ho and published by . This book was released on 1996 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Valuation of American Options with Stochastic Interest Rates written by Anthony Saunders and published by . This book was released on 1991 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Discrete Time Valuation of American Options with Stochastic Interest Rates written by Kaushik I. Amin and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop an arbitrage-free discrete time model to price American-style claims for which domestic term structurerisk, foreign term structure risk and currency risk are important. This model combines a discrete version of the Heath, Jarrow, Morton (1992) term structure model with the binomial model of Cox, Ross, and Rubinstein (1979). It converges (weakly) to the continuous time models in Amin and Jarrow (1991, 1992). The general model is quot;path dependentquot; and can be implemented with arbitrary volatility functions to value claims with maturity up to five years. The model is illustrated with applications to long-dated American currency warrants and a cross-rate swap from the quanto class.
Download or read book The Valuation of American Options in Stochastic Interest Rate Economies written by Teng Suan Ho and published by . This book was released on 1992 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book A Pricing Model for American Options with Stochastic Interest Rates written by Ton Vorst and published by . This book was released on 2008 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we develop a new method to value American stock options with stochastic interest rates. We construct a binomial tree for the stock price divided by the price of the zero coupon bond that matures at the maturity date of the option. In fact, we construct a tree for the so-called forward risk adjusted measure. In each node of the tree the quotient of the stock price and bond price is constant and there are combinations of stock and bond prices for which immediate exercise is optimal and other combinations for which this is not the case. We derive for each node in the tree an analytic expression for the expected immediate exercise premium conditional on this quotient of stock and bond prices. This immediate exercise premium is added to the value that is derived from the familiar backward procedure. Both European and American option prices depend on the correlation between the interest rate process and the stock price process. It is interesting to see that with increasing correlation between the interest rate process and the stock price process, and hence a decreasing correlation between bond and stock prices, the values of European options increase, while the values of the early exercise premium decrease. For American options this might result in a non-monotonic relation between the correlation coefficient and the option price. Furthermore, there is evidence that the early exercise premium due to stochastic interest rates is much larger than established before by other researchers. Finally, we also consider the influence of the shape of the initial term structure.
Download or read book A Pricing Model for American Options with Stochastic Interest Rates written by Albert Jan Menkveld and published by . This book was released on 1998 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Pricing American Options with Stochastic Interest Rates written by Kaushik I. Amin and published by . This book was released on 1992 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Valuation of American Options on Bonds written by T. S. Ho and published by . This book was released on 1997 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The valuation of American-style bond options involves two important aspects that need to be modeled carefully. First, stochastic interest rates influence the volatility of the price of the bond, the underlying asset, in a complex fashion as the bond approaches maturity, and hence, the incremental value of the early exercise (American) feature. Second, the early exercise decision for such options is affected by the term structure of interest rates on future dates, since the live value of the claim on each future date depends on the discount rates on that date. These two aspects are modeling in this paper. The paper analyzes the value of American options on bonds using a generalization of the Geske-Johnson (1984) technique. The method uses as inputs the valuation of European options, and options with multiple exercise dates. It is proved that a risk-neutral valuation relationship along the lines of the Black-Scholes (1973) model holds for options exercisable on multiple dates, even under stochastic interest rates, when the price of the underlying asset is lognormally distributed. The proposed computational method uses the maximized value of these options, where the maximization is over all possible exercise dates. The value of the American option is then computed by Richardson extrapolation. The volatility of the underlying default-free bond is modeled using a two-factor model, with a short-term and a long-term interest rate factor. The paper reports the results of simulations of American option values and show how they vary with the key parameter inputs, such as the maturity of the bond, its volatility, and the option strike price.
Download or read book The Generalised Geske Johnson Technique for the Valuation of American Options with Stochastic Interest Rates written by San-Lin Chung and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Pricing American Options with Stochastic Interest Rates written by Kaushik Ishwar Amin and published by . This book was released on 1992 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book American Spread Option Pricing with Stochastic Interest Rates written by An Jiang and published by . This book was released on 2016 with total page 149 pages. Available in PDF, EPUB and Kindle. Book excerpt: In financial markets, spread option is a derivative security with two underlying assets and the payoff of the spread option depends on the difference of these assets. We consider American style spread option which allows the owners to exercise it at any time before the maturity. The complexity of pricing American spread option is that the boundary of the corresponding partial differential equation which determines the option price is unknown and the model for the underlying assets is two-dimensional.
Download or read book Pricing American Call Options with Dividend and Stochastic Interest Rates written by Shu-Ing Liu and published by . This book was released on 2009 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: This article presents a closed form solution for pricing American stock call options with one known dividend under the Ho-Lee stochastic interest rate assumptions. Both the closed-form pricing formula and delta hedge ratio formula for the discussed American stock call options are derived. The correlation between the underlying stock price process and the discount factor process is suitably established. Numerical analyses demonstrate that there are some crucial parameters, the correlation coefficient between the stock price process and the discount factor process, and the amount of dividend, that have an impact on the option price and the delta hedge ratio. These results provide researchers and participants with some pricing and hedging applications in the real financial market.
Download or read book Pricing American Options Under Stochastic Volatility and Stochastic Interest Rates written by Jannick B. G. Schreiner and published by . This book was released on 2012 with total page 71 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book An Investigation of the Impact of Stochastic Interest Rates on the Pricing of Equity Options written by Peter Carayannopoulos and published by . This book was released on 1993 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Pricing American Options Under Stochastic Volatility and Stochastic Interest Rates written by Alexey Medvedev and published by . This book was released on 2007 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Financial Derivatives Pricing Selected Works Of Robert Jarrow written by Robert A Jarrow and published by World Scientific. This book was released on 2008-10-08 with total page 609 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is a collection of original papers by Robert Jarrow that contributed to significant advances in financial economics. Divided into three parts, Part I concerns option pricing theory and its foundations. The papers here deal with the famous Black-Scholes-Merton model, characterizations of the American put option, and the first applications of arbitrage pricing theory to market manipulation and liquidity risk.Part II relates to pricing derivatives under stochastic interest rates. Included is the paper introducing the famous Heath-Jarrow-Morton (HJM) model, together with papers on topics like the characterization of the difference between forward and futures prices, the forward price martingale measure, and applications of the HJM model to foreign currencies and commodities.Part III deals with the pricing of financial derivatives considering both stochastic interest rates and the likelihood of default. Papers cover the reduced form credit risk model, in particular the original Jarrow and Turnbull model, the Markov model for credit rating transitions, counterparty risk, and diversifiable default risk.
Download or read book Pricing American Options on Risky Assets in a Stochastic Interest Rate Economy written by Kaushik I. Amin and published by . This book was released on 1991 with total page 78 pages. Available in PDF, EPUB and Kindle. Book excerpt:
