An important assumption of the Black and Scholes option pricing model in 1973 is that underlying stock market liquidity has full liquidity. However, if the liquidity is not sufficient, the behavior of the investors, replicating an option by self financing portfolio, will cause the underlying stock...
probability measure ambiguitypricing kernelequivalent martingale measurecall-put parityambiguity premiumvolatility smileThis paper develops an option pricing model that admits probability measure ambiguity. It formulates a piecewise risk-ambiguity-neutral probability density funcLiu, Yu...
The Valuation of Upwards-Only Rent Reviews: An Option Pricing Model - Ward, French - 1997Ward, C. and French, N. ( 1997 ), “ The valuation of upwards‐only rent review: an option pricing model ”, Journal of Property Valuation & Investment , Vol. 15 No. 2, pp. 171 ‐ 82 . [...
Pricing an option relies on the facts that a perfectly hedged investment earns the risk-free rate and that, based on the binomial option pricing model, the size of the two possible changes in the option price (meaning the potential step up or step down in the option value) after one ...
This study develops an option pricing model to evaluate the trade-off relationship between the hire rates and the exercise prices of purchase options. Numerical analysis is conducted using four input variables namely the spot ship prices, the volatility of the spot ship prices, the time to ...
In this paper, we empirically compare the pricing and forecasting per- formance of the wavelet option pricing model, the spline method, and the parametric stochastic volatility model with jumps. Both in-sample pric- ing and out-of-sample forecasting accuracy are examined,using the US and UK in...
option-pricing model. Practitioners may not use it as it was intended, but it has become their language of choice. No other model will achieve this. In some products (for instance currencies), option prices are actually quoted in implied volatility. The success of the BS model stems not so...
Loss Functions in Option Valuation: A Framework for Model Selection We illustrate the effect on the out-of-sample pricing errors in an application of the ad hoc Black-Scholes model to DAX index options. Our empirical ... Bams, Dennis,T Lehnert,Wolff, Christian - C.E.P.R. Discussion Paper...
This paper proposes an option pricing model, extended from the GARCH option pricing model of Duan (1995) and the Threshold-GARCH model of Hardle and Hafner (2000). Some moment properties of the proposed model are analytically proven. For simplicity or flexibility, the risk-free rate of return...
The mispricing of the deep-in-the money and deep-out-the-money generated by the Black and Scholes model is now well documented in the literature. In this paper, we discuss different option valuation models on the basis of empirical tests carry out on the French option market. We examine ...