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Author :
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (368 download)
Download or read book American Options with Stochastic Dividends and Volatility written by and published by . This book was released on 1996 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Mark Broadie
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)
Download or read book American Options with Stochastic Dividends and Volatility written by Mark Broadie and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we consider American option contracts when the underlying asset has stochastic dividends and stochastic volatility. We provide a full discussion of the theoretical foundations of American option valuation and exercise boundaries. We show how they depend on the various sources of uncertainty which drive dividend rates and volatility, and derive equilibrium asset prices, derivative prices and optimal exercise boundaries in a general equilibrium model. The theoretical models yield fairly complex expressions which are difficult to estimate. We therefore adopt a nonparametric approach which enables us to investigate reduced forms. Indeed, we use nonparametric methods to estimate call prices and exercise boundaries conditional on dividends and volatility. Since the latter is a latent process, we propose several approaches, notably using EGARCH filtered estimates, implied and historical volatilities. The nonparametric approach allows us to test whether call prices and exercise decisions are primarily driven by dividends, as has been advocated by Harvey and Whaley (1992a,b) and Fleming and Whaley (1994) for the OEX contract, or whether stochastic volatility complements dividend uncertainty. We find that dividends alone do not account for all aspects of call option pricing and exercise decisions, suggesting a need to include stochastic volatility.
Author : CIRANO.
Publisher : Montréal : CIRANO
ISBN 13 :
Total Pages : 43 pages
Book Rating : 4.:/5 (368 download)
Download or read book American Options with Stochastic Dividends and Volatility : a Nonparametric Investigation written by CIRANO. and published by Montréal : CIRANO. This book was released on 1996 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Arun Chockalingam
Publisher :
ISBN 13 :
Total Pages : 30 pages
Book Rating : 4.:/5 (129 download)
Download or read book American Options Under Stochastic Volatility written by Arun Chockalingam and published by . This book was released on 2012 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: The problem of pricing an American option written on an underlying asset with constant price volatility has been studied extensively in literature. Real-world data, however, demonstrates that volatility is not constant and stochastic volatility models are used to account for dynamic volatility changes. Option pricing methods that have been developed in literature for pricing under stochastic volatility focus mostly on European options. We consider the problem of pricing American options under stochastic volatility which has relatively had much less attention from literature. First, we develop an exercise-policy improvement procedure to compute the optimal exercise policy and option price. We show that the scheme monotonically converges for various popular stochastic volatility models in literature. Second, using this computational tool, we explore a variety of questions that seek insights into the dependence of option prices, exercise policies and implied volatilities on the market price of volatility risk and correlation between the asset and stochastic volatility.
Author : Manisha Goswami
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (664 download)
Download or read book American Option Pricing Under Stochastic Volatility written by Manisha Goswami and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The approximate method to price American options makes use of the fact that accurate pricing of these options does not require exact determination of the early exercise boundary. Thus, the procedure mixes the two models of constant and stochastic volatility. The idea is to obtain early exercise boundary through constant volatility model using the approximation methods of AitSahlia and Lai or Ju and then utilize this boundary to price the options under stochastic volatility models. The data on S & P 100 Index American options is used to analyze the pricing performance of the mixing of the two models. The performance is studied with respect to percentage pricing error and absolute pricing errors for each money-ness maturity group.
Author : Miquel Montero
Publisher :
ISBN 13 :
Total Pages : 21 pages
Book Rating : 4.:/5 (129 download)
Download or read book Volatility and Dividend Risk in Perpetual American Options written by Miquel Montero and published by . This book was released on 2007 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: American options are financial instruments that can be exercised at any time before expiration. In this paper we study the problem of pricing this kind of derivatives within a framework in which some of the properties - volatility and dividend policy - of the underlaying stock can change at a random instant of time, but in such a way that we can forecast their final values. Under this assumption we can model actual market conditions because some of the most relevant facts that may potentially affect a firm will entail sharp predictable effects. We will analyse the consequences of this potential risk on perpetual American derivatives, a topic connected with a wide class of recurrent problems in physics: holders of American options must look for the fair price and the optimal exercise strategy at once, a typical question of free absorbing boundaries. We present explicit solutions to the most common contract specifications and derive analytical expressions concerning the mean and higher moments of the exercise time.
Author : Jannick B. G. Schreiner
Publisher :
ISBN 13 :
Total Pages : 71 pages
Book Rating : 4.:/5 (861 download)
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:
Author : Svetlana Boyarchenko
Publisher :
ISBN 13 :
Total Pages : 36 pages
Book Rating : 4.:/5 (129 download)
Download or read book American Options in Levy Models with Stochastic Volatility written by Svetlana Boyarchenko and published by . This book was released on 2008 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: A general numerical method for pricing American options in regime switching jump diffusion models of stock dynamics with stochastic interest rates and/or volatility is developed. Time derivative and infinitesimal generator of the process for factors that determine the dynamics of the interest rate and/or volatility are discretized. The result is a sequence of embedded perpetual options in a Markov-modulated Levy model. Options in the sequence are solved using an iteration method based on the Wiener-Hopf factorization. As an application, an explicit algorithm for the case of a Levy process with the intensity coefficient driven by the square root process with embedded jumps is derived. Numerical examples corroborate the general result about a gap between strike and early exercise boundary at expiry, in a neighborhood of r=0, in the presence of jumps.
Author : Suchandan Guha
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (664 download)
Download or read book American Option Pricing Under Stochastic Volatility written by Suchandan Guha and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: ABSTRACT: We developed two new numerical techniques to price American options when the underlying follows a bivariate process. The first technique exploits the semi-martingale representation of an American option price together with a coarse approximation of its early exercise surface that is based on an efficient implementation of the least-squares Monte Carlo method. The second technique exploits recent results in the efficient pricing of American options under constant volatility. Extensive numerical evaluations show these methods yield very accurate prices in a computationally efficient manner with the latter significantly faster than the former. However, the flexibility of the first method allows for its extension to a much larger class of optimal stopping problems than addressed in this paper.
Author : Zhe Zhang
Publisher :
ISBN 13 :
Total Pages : 198 pages
Book Rating : 4.:/5 (968 download)
Download or read book An Analytical Approach to Pricing American Options Under Stochastic Volatility written by Zhe Zhang and published by . This book was released on 2000 with total page 198 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Alexey Medvedev
Publisher :
ISBN 13 :
Total Pages : 48 pages
Book Rating : 4.:/5 (716 download)
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:
Author : Samuli Ikonen
Publisher :
ISBN 13 : 9789513919801
Total Pages : 26 pages
Book Rating : 4.9/5 (198 download)
Download or read book Operator Splitting Methods for Pricing American Options with Stochastic Volatility written by Samuli Ikonen and published by . This book was released on 2004 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Jonathan Ziveyi
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (13 download)
Download or read book American Option Pricing Under Two Stochastic Volatility Processes written by Jonathan Ziveyi and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we consider the pricing of an American call option whose underlying asset dynamics evolve under the influence of two independent stochastic volatility processes as proposed in Christoffersen, Heston and Jacobs (2009). We consider the associated partial differential equation (PDE) for the option price and its solution. An integral expression for the general solution of the PDE is presented by using Duhamel's principle and this is expressed in terms of the joint transition density function for the driving stochastic processes. For the particular form of the underlying dynamics we are able to solve the Kolmogorov PDE for the joint transition density function by first transforming it to a corresponding system of characteristic PDEs using a combination of Fourier and Laplace transforms. The characteristic PDE system is solved by using the method of characteristics. With the full price representation in place, numerical results are presented by first approximating the early exercise surface with a bivariate log linear function. We perform numerical comparisons with results generated by the method of lines algorithm and note that our approach provides quite good accuracy.
Author : Svetlana Boyarchenko
Publisher :
ISBN 13 :
Total Pages : 19 pages
Book Rating : 4.:/5 (129 download)
Download or read book American Options written by Svetlana Boyarchenko and published by . This book was released on 2005 with total page 19 pages. Available in PDF, EPUB and Kindle. Book excerpt: We explicitly solve the pricing problem for perpetual American puts and calls, and provide an efficient semi-explicit pricing procedure for options with finite time horizon. Contrary to the standard approach, which uses the price process as a primitive, we model the price process as the expected present value of a stream, which is a monotone function of a Levy process. Certain processes exhibiting mean-reverting, stochastic volatility and/or switching features can be modelled in this way. This specification allows us to consider assets that pay no dividends at all when the level of the underlying stochastic factor is too low, assets that pay dividends at a fixed rate when the underlying stochastic process remains in some range, or capped dividends.
Author : Elias Tzavalis
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (535 download)
Download or read book Pricing American Options Under Stochastic Volatility written by Elias Tzavalis and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Boda Kang
Publisher :
ISBN 13 :
Total Pages : 49 pages
Book Rating : 4.:/5 (13 download)
Download or read book The Impact of Jumps on American Option Pricing written by Boda Kang and published by . This book was released on 2019 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the importance of asset and volatility jumps in American option pricing models. Using the Heston (1993) stochastic volatility model with asset and volatility jumps and the Hull and White (1987) short rate model, American options are numerically evaluated by the Method of Lines. The calibration of these models to S&P 100 American options data reveals that jumps, especially asset jumps, play an important role in improving the models' ability to fit market data. Further, asset and volatility jumps tend to lift the free boundary, an effect that augments during volatile market conditions, while the additional volatility jumps marginally drift down the free boundary. As markets turn more volatile and exhibit jumps, American option holders become more prudent with their exercise decisions, especially as maturity of the options approaches.
Author : Robert A. Jarrow
Publisher : Irwin Professional Publishing
ISBN 13 :
Total Pages : 272 pages
Book Rating : 4.:/5 (321 download)
Download or read book Option Pricing written by Robert A. Jarrow and published by Irwin Professional Publishing. This book was released on 1983 with total page 272 pages. Available in PDF, EPUB and Kindle. Book excerpt:
