Read Books Online and Download eBooks, EPub, PDF, Mobi, Kindle, Text Full Free.
Download Optimal Valuation Of Options Under Transaction Costs full books in PDF, epub, and Kindle. Read online Optimal Valuation Of Options Under Transaction Costs ebook anywhere anytime directly on your device. Fast Download speed and no annoying ads. We cannot guarantee that every ebooks is available!
Author : Michael Monoyios
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (595 download)
Download or read book Optimal Valuation of Options Under Transaction Costs written by Michael Monoyios and published by . This book was released on 1999 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Michal Czerwonko
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (11 download)
Download or read book The Stochastic Dominance Valuation of Options Under Transaction Costs written by Michal Czerwonko and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the first essay American call and put options on the S & P 500 index futures that violate the stochastic dominance bounds of Constantinides and Perrakis (CP, 2007) over 1983-2006 are identified as potentially profitable investment opportunities. Call bid prices more frequently violate their upper bound than put bid prices do, while evidence of underpriced calls and puts over this period is scant. In out-of-sample tests, the inclusion of short positions in such overpriced calls, puts, and, particularly, straddles in the market portfolio is shown to increase the expected utility of any risk averse investor and also increase the Sharpe ratio, net of transaction costs and bid-ask spreads. The results are strongly supportive of mispricing and also strongly supportive of the CP bounds as screening mechanisms for mispriced options. The second essay introduces a result for call lower bound more powerful that the one applied in the first part of this thesis. The Proposition 5 call lower bound in Constantinides and Perrakis (2002) is shown to have a non-trivial limit as the time interval tends to zero. This establishes the bound as the first call lower bound known in the literature on derivative pricing in the presence of transaction costs with a non-trivial limit. The bound is shown to be tight even for a low number of time subdivisions. Novel numerical methods to derive recursive expectations under a Markovian but non-identically distributed stochastic process are presented. The third essay relaxes an assumption in the first part of this thesis on the optimal trading policy in the presence of transaction costs. We derive the boundaries of the region of no transaction when the risky asset follows a mixed jump-diffusion instead of a simple diffusion process. These boundaries are shown to differ from their diffusion counterparts in relation to the jump intensity for lognormally distributed jump size. A general numerical approach is presented for iid risky asset returns in discrete time. An error in an earlier published work on the region of no transaction for discretized diffusions is demonstrated and corrected results are presented. Comparative results with a recent study on the same topic are presented and it is shown that the numerical algorithm has equally attractive approximation properties to the unknown continuous time limit.
Author : Jacqueline Clarke
Publisher : John Wiley & Sons
ISBN 13 : 0730376370
Total Pages : 256 pages
Book Rating : 4.7/5 (33 download)
Download or read book Options Made Simple written by Jacqueline Clarke and published by John Wiley & Sons. This book was released on 2011-12-27 with total page 256 pages. Available in PDF, EPUB and Kindle. Book excerpt: The sixth book in the Wrightbooks Made Simple series, Options Made Simple is an uncomplicated guide to trading options for beginners. This book outlines some simple, easy to understand strategies anyone can use to start trading options. The book will be a succinct paperback with lower price point, and provide the perfect first step into trading options. An option is a binding contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date it has strictly defined terms and properties. Options are very versatile and allow you to change your position according to the situation they can be speculative or conservative depending on your trading strategy, but the risk can be mitigated by having a firm basic understanding. The Made Simple series is the perfect vehicle for this content as readers are taken step\by\step through everything they need to know about trading options. Including what can go wrong and can work out which strategies they are most comfortable with.
Author : Yuri Kabanov
Publisher : Springer Science & Business Media
ISBN 13 : 3540681213
Total Pages : 306 pages
Book Rating : 4.5/5 (46 download)
Download or read book Markets with Transaction Costs written by Yuri Kabanov and published by Springer Science & Business Media. This book was released on 2009-12-04 with total page 306 pages. Available in PDF, EPUB and Kindle. Book excerpt: The book is the first monograph on this highly important subject.
Author : Alet Roux
Publisher : VDM Publishing
ISBN 13 : 9783836492393
Total Pages : 0 pages
Book Rating : 4.4/5 (923 download)
Download or read book Options Under Transaction Costs written by Alet Roux and published by VDM Publishing. This book was released on 2008-10 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is aimed at researchers and PhD students in mathematical finance. It studies the pricing and hedging of options in financial markets with proportional transaction costs on trading in shares, modeled as bid-ask spreads, and different interest rates for borrowing and lending of cash. This is done by means of fair pricing and super-hedging. The fair price of an option is any market price for it that does not allow traders to make profit with no risk, and a super-hedging strategy allows the seller and buyer to remain in a solvent position after respectively delivering and receiving the option payoff. Efficient algo-rithms are presented for computing the bid and ask prices of European and American options; these prices serve as bounds on the fair prices. This unifies all existing algorithms for the calculation of such prices. As a by-product, a straightforward iterative method is found for determining the optimal super-hedging strategies (and stopping times) for both the buyer and seller of an option, and also optimal stopping strategies in the case of American options.
Author : International Accounting Standards Board
Publisher :
ISBN 13 :
Total Pages : 104 pages
Book Rating : 4.E/5 ( download)
Download or read book Fair Value Measurements written by International Accounting Standards Board and published by . This book was released on 2006 with total page 104 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Elyès Jouini
Publisher : Cambridge University Press
ISBN 13 : 9780521792370
Total Pages : 324 pages
Book Rating : 4.7/5 (923 download)
Download or read book Option Pricing, Interest Rates and Risk Management written by Elyès Jouini and published by Cambridge University Press. This book was released on 2001 with total page 324 pages. Available in PDF, EPUB and Kindle. Book excerpt: This 2001 handbook surveys the state of practice, method and understanding in the field of mathematical finance. Every chapter has been written by leading researchers and each starts by briefly surveying the existing results for a given topic, then discusses more recent results and, finally, points out open problems with an indication of what needs to be done in order to solve them. The primary audiences for the book are doctoral students, researchers and practitioners who already have some basic knowledge of mathematical finance. In sum, this is a comprehensive reference work for mathematical finance and will be indispensable to readers who need to find a quick introduction or reference to a specific topic, leading all the way to cutting edge material.
Author : Giorgio Consigli
Publisher : Springer
ISBN 13 : 3319416138
Total Pages : 310 pages
Book Rating : 4.3/5 (194 download)
Download or read book Optimal Financial Decision Making under Uncertainty written by Giorgio Consigli and published by Springer. This book was released on 2016-10-17 with total page 310 pages. Available in PDF, EPUB and Kindle. Book excerpt: The scope of this volume is primarily to analyze from different methodological perspectives similar valuation and optimization problems arising in financial applications, aimed at facilitating a theoretical and computational integration between methods largely regarded as alternatives. Increasingly in recent years, financial management problems such as strategic asset allocation, asset-liability management, as well as asset pricing problems, have been presented in the literature adopting formulation and solution approaches rooted in stochastic programming, robust optimization, stochastic dynamic programming (including approximate SDP) methods, as well as policy rule optimization, heuristic approaches and others. The aim of the volume is to facilitate the comprehension of the modeling and methodological potentials of those methods, thus their common assumptions and peculiarities, relying on similar financial problems. The volume will address different valuation problems common in finance related to: asset pricing, optimal portfolio management, risk measurement, risk control and asset-liability management. The volume features chapters of theoretical and practical relevance clarifying recent advances in the associated applied field from different standpoints, relying on similar valuation problems and, as mentioned, facilitating a mutual and beneficial methodological and theoretical knowledge transfer. The distinctive aspects of the volume can be summarized as follows: Strong benchmarking philosophy, with contributors explicitly asked to underline current limits and desirable developments in their areas. Theoretical contributions, aimed at advancing the state-of-the-art in the given domain with a clear potential for applications The inclusion of an algorithmic-computational discussion of issues arising on similar valuation problems across different methods. Variety of applications: rarely is it possible within a single volume to consider and analyze different, and possibly competing, alternative optimization techniques applied to well-identified financial valuation problems. Clear definition of the current state-of-the-art in each methodological and applied area to facilitate future research directions.
Author : Ling Chen
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (665 download)
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.
Author : Stewart Hodges
Publisher : Manchester University Press
ISBN 13 : 9780719036354
Total Pages : 344 pages
Book Rating : 4.0/5 (363 download)
Download or read book Options written by Stewart Hodges and published by Manchester University Press. This book was released on 1992 with total page 344 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Ajay Subramanian Aiyer
Publisher :
ISBN 13 :
Total Pages : 30 pages
Book Rating : 4.E/5 ( download)
Download or read book European Option Pricing with Fixed Transaction Costs written by Ajay Subramanian Aiyer and published by . This book was released on 1996 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Andrea Petrelli
Publisher :
ISBN 13 :
Total Pages : 85 pages
Book Rating : 4.:/5 (13 download)
Download or read book Optimal Dynamic Hedging of Equity Options written by Andrea Petrelli and published by . This book was released on 2019 with total page 85 pages. Available in PDF, EPUB and Kindle. Book excerpt: Attempted dynamic replication based valuation of equity options is analyzed using the Optimal Hedge Monte-Carlo (OHMC) method. Detailed here are (1) the option hedging strategy and its costs; (2) irreducible hedging errors associated with realistically fat-tailed & asymmetric return distributions; (3) impact of transaction costs on hedging costs and hedge-performance; (4) impact of conditioning hedging strategy on realized volatility. The asset returns are addressed by the General Auto-Regressive Asset Model (GARAM, Wang et al [2009]) that employs two stochastic processes to model the return magnitude and sign and results in a realistic term-structure of the fat-tails, dynamic-asymmetry, and clustering of volatility. The relationship between the option price and ensuing return versus risk characteristics of the option seller-hedger & buyer-hedger are described for different conditioning regimes in GARAM. A hurdle return is employed to assess bounding values of options that reflect hedging costs, the inevitable hedge slippage, & transaction costs. The hurdle return can also be used to make relative-value inferences (e.g., by comparing to the return-risk profile of a delta-1 position in the underlying) or even fit option values to market while still informing the trader about residual risk and its asymmetry between option buyer-hedger and seller-hedger. Tail-risk measures are shown to diminish by conditioning the hedging strategy and valuation on realized volatility. The role of fat-tails and uncertainty of realized volatility and its temporal persistence in controlling the optimal hedge ratios, irreducible hedging errors, and option-trading risk premiums are delineated.
Author : Tim Siu-tang Leung
Publisher : World Scientific
ISBN 13 : 9813209658
Total Pages : 228 pages
Book Rating : 4.8/5 (132 download)
Download or read book Employee Stock Options: Exercise Timing, Hedging, And Valuation written by Tim Siu-tang Leung and published by World Scientific. This book was released on 2021-07-29 with total page 228 pages. Available in PDF, EPUB and Kindle. Book excerpt: Employee stock options (ESOs) are an integral component of compensation in the US. In fact, almost all S&P 500 companies grant options to their top executives, and the total value accounts for almost half of the total pay for their CEOs. In view of the extensive use and significant cost of ESOs to firms, the Financial Accounting Standards Board (FASB) has mandated expensing ESOs since 2004. This gives rise to the need to create a reasonable valuation method for these options for most firms that grant ESOs to their employees. The valuation of ESOs involves a number of challenging issues, and is thus an important active research area in Accounting, Corporate Finance, and Financial Mathematics.In this exciting book, the author discusses the practical and challenging problems surrounding ESOs from a financial mathematician's perspective. This book provides a systematic overview of the contractual features of ESOs and thoughtful discussions of different valuation approaches, with emphasis on three major aspects: (i) hedging strategies; (ii) exercise timing; and (iii) valuation methodologies. In addition to addressing each of these categories, this book also highlights their connections and combined effects of the cost of ESOs to firms, as well as examines the implications to modeling and valuation approaches. The book features a unique approach that combines stochastic modeling and control techniques with option pricing theory, and provides formulas and numerical schemes for fast implementation and clear illustration.
Author : Sebastian Paik
Publisher : University of Bamberg Press
ISBN 13 : 3863091787
Total Pages : 365 pages
Book Rating : 4.8/5 (63 download)
Download or read book Valuation, Empirical Analysis, and Optimal Exercise of Open-End Turbo Certificates written by Sebastian Paik and published by University of Bamberg Press. This book was released on 2014 with total page 365 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Stephen Figlewski
Publisher : McGraw-Hill Professional Publishing
ISBN 13 :
Total Pages : 600 pages
Book Rating : 4.F/5 ( download)
Download or read book Financial Options written by Stephen Figlewski and published by McGraw-Hill Professional Publishing. This book was released on 1990 with total page 600 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Hong Liu
Publisher :
ISBN 13 :
Total Pages : 36 pages
Book Rating : 4.:/5 (129 download)
Download or read book Optimal Portfolio Selection with Transaction Costs and 'Event Risk' written by Hong Liu and published by . This book was released on 2009 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: Models with event risk (the possibility of sudden large price movements) have proven important for option pricing (e.g., Bates (1996))and optimal portfolio selection (e.g., Liu, Longstaff and Pan(2003)). However, most of the existing studies ignore transaction costs which are prevalent in almost all of the financial markets. How investors should trade in the presence of event risks and transaction costs remains an important but unanswered question. In this paper, we consider the optimal trading strategy for a CRRA investor who derives utility from terminal wealth and can continuously trade in a riskless asset and a risky asset. The risky asset, whose price follows a jump diffusion, is subject to proportional transaction costs. We show that the optimal trading strategy is to maintain the fraction of wealth invested in the risky asset between two bounds. In contrast to the case without jump risk, this fraction can jump outside the bounds which implies a discrete transaction back to the closest boundary and thus a greater transaction cost payment. We characterize the value function and provide bounds on the trading boundaries. Somewhat surprisingly, we find that an increase in transaction costs may increase trading frequency. Our numerical results suggest that event risk significantly reduces stock holdings and decreases trading frequency. We also show that the boundaries are affected not only by jump sizes but also by the uncertainty about jump sizes. Furthermore, we examine how the optimal transaction boundaries vary through time for investors with deterministic horizons.
Author : Ajay Subramanian
Publisher :
ISBN 13 :
Total Pages : 63 pages
Book Rating : 4.:/5 (129 download)
Download or read book European Option Pricing with General Transaction Costs and Short-Selling Constraints written by Ajay Subramanian and published by . This book was released on 2005 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we study the problem of European Option Pricing in a market with short-selling constraints and transaction costs having a very general form. We consider two types of proportional costs and a strictly positive fixed cost. We study the problem within the framework of the theory of stochastic impulse control. We show that determining the price of a European option involves calculating the value functions of two stochastic impulse control problems. We obtain explicit expressions for the quasi-variational inequalities satisfied by the value functions and derive the solution in the case where the parameters of the price processes are constants and the investor's utility function is linear. We use this result to obtain a price for a call option on the stock and prove that this price is a nontrivial lower bound on the hedging price of the call option in the presence of general transaction costs and short-selling constraints. We then consider the situation where the investor's utility function has a general form and characterize the value function as the pointwise limit of an increasing sequence of solutions to associated optimal stopping problems. We thereby devise a numerical procedure to calculate the option price in this general setting and implement the procedure to calculate the option price for the class of exponential utility functions. Finally, we carry out a qualitative investigation of the option prices for exponential and linear-power utility functions.
