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Author : Phelim P. Boyle
Publisher :
ISBN 13 :
Total Pages : 23 pages
Book Rating : 4.:/5 (661 download)
Download or read book Option Replication in Discrete Time with Transaction Costs written by Phelim P. Boyle and published by . This book was released on 1992 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Malene Sun Kim Friis
Publisher :
ISBN 13 :
Total Pages : 44 pages
Book Rating : 4.:/5 (77 download)
Download or read book Option Replication in Discrete Time with Transaction Costs written by Malene Sun Kim Friis and published by . This book was released on 2011 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Jean LeFoll
Publisher :
ISBN 13 :
Total Pages : 16 pages
Book Rating : 4.:/5 (27 download)
Download or read book Option Replication in Discrete Time with Transactions Costs : a Note written by Jean LeFoll and published by . This book was released on 1993 with total page 16 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Ken Palmer
Publisher :
ISBN 13 :
Total Pages : 21 pages
Book Rating : 4.:/5 (155 download)
Download or read book The Least Cost Super Replicating Portfolio in the Boyle-Vorst Discrete-time Option Pricing Model with Transaction Costs: the One-period Case written by Ken Palmer and published by . This book was released on 2001 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Aurele Mawudo Houngbedji
Publisher :
ISBN 13 : 9780599799356
Total Pages : 116 pages
Book Rating : 4.7/5 (993 download)
Download or read book Jump Diffusion Processes: Discrete-time Option Replication and Pricing European Call Options in the Presence of Transaction Costs written by Aurele Mawudo Houngbedji and published by . This book was released on 2000 with total page 116 pages. Available in PDF, EPUB and Kindle. Book excerpt: Whereas the discrete-time hedging strategies and hedging error problems have been examined by several researchers under the Black-Scholes assumption of geometric Brownian motion, nothing has been done to the problems when the stocks have discontinuous returns. This dissertation, examines two major issues in options pricing and hedging: the problem of discrete-time hedging and hedging error on the one hand, and pricing European call options in the presence of transaction costs on the other, when the underlying securities follow a jump-diffusion process. Under the assumptions of the continuous time models presented by Bardhan and Chao (1993), we develop discrete-time hedging strategies using a fixed revision interval and constant parameters for European call option, and analyzed the associated hedging errors associated. We proved that the total hedging error converges to zero in probability as the time between rebalancing points goes to zero. For small revision time intervals, we derive an approximate conditional distribution for the individual one period hedging errors. We derive an exact closed form expression for the total expected hedging error, conditional on the information at time when the call option is written. The results obtained can be used in risk management to monitor the performance of the strategies. We also developed an equation for European call options when the underlying asset follows the jump-diffusion process in the presence of non-zero transaction costs: extending an equation of Leland's (1985).
Author : Ariane Reiss
Publisher :
ISBN 13 :
Total Pages : 25 pages
Book Rating : 4.:/5 (129 download)
Download or read book Option Replication with Large Transactions Costs written by Ariane Reiss and published by . This book was released on 1999 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: Contrary to a continuous-time model, in a discrete-time binomial model it is possible to construct a self-financing strategy which exactly replicates the payoff of a European option contract at maturity in the presence of proportional transactions costs. We derive an upper boundary for the cost factor in a market where all investors face the same factor. This upper boundary ensures the efficiency of the riskfree bond price as well as the stock price process. It turns out that perfect replication is optimal in the presence of only one transactions costs factor. Furthermore, conditions are given under which superreplicating strategies are dominant under differential transactions costs. A closed-form solution for the value of a Short call option is derived. While this least initial endowment is preference-free, the individual replicating strategy is preference-dependent. In addition, we show how the value of a Long European call option is derived computationally easily.
Author : Lionel Martellini
Publisher :
ISBN 13 :
Total Pages : 31 pages
Book Rating : 4.:/5 (129 download)
Download or read book Efficient Option Replication in the Presence of Transaction Costs written by Lionel Martellini and published by . This book was released on 2001 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the presence of transaction costs, a risk-return trade-off exists between the quality and the cost of a replicating strategy. In that context, I show how to expand the set of all possible time-based strategies through the introduction of a multi-scale class of strategies, which consist in rebalancing different fractions of an option portfolio at different time frequencies. The method, based on time-scale diversification, is to dynamic replication what investment in diversified portfolios is to static portfolio selection: in a dynamic context, one may enjoy the benefits of diversification by using different time scales in trading the same asset.
Author : Ken Palmer
Publisher :
ISBN 13 :
Total Pages : 25 pages
Book Rating : 4.:/5 (964 download)
Download or read book Replicating and Super Replicating Portfolios in the Boyle-Vorst Discrete-time Option Pricing Model with Transaction Costs written by Ken Palmer and published by . This book was released on 2001 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Ken Palmer
Publisher :
ISBN 13 :
Total Pages : 49 pages
Book Rating : 4.:/5 (154 download)
Download or read book Extensions to the Boyle-Vorst Discrete-time Option Pricing Model with Transactions Costs written by Ken Palmer and published by . This book was released on 2000 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: Working in a binomial framework, Boyle and Vorst (1992) derive self-financing strategies perfectly replicating the final payoffs to long positions in European call and put options, assuming proportional transactions costs on trades in the stocks. The initial cost of such a strategy yields, by an arbitrage argument, an upper bound for the option price. A lower bound for the option price is obtained by replicating a short position. However, for short positions, Boyle and Vorst have to impose three additional conditions. The authors' first aim in this paper is to remove Boyle and Vorst's conditions for the replication of short calls and puts. Boyle and Vorst's algorithm calculates the current holdings in stocks and bonds in terms of those at the following period. This is unlike the case of no transaction costs where the current cost of the option can be calculated directly from the costs at the following period. The authors' second aim is to show that even in the case of transactions costs the cost of replication can be directly calculated also. As a by-product, the authors are able to derive upper bounds for the cost of replication which are valid for long positions and also for short positions when two of Boyle and Vorst's additional conditions hold. The authors' third aim is to show that the time of computation using the backward recursion can be halved. This seems to to be a new observation, even in the case of no transactions costs.
Download or read book Replication and Super Replicating Portfolios in the Boyle-Vorst Discrete-time Option Pricing Model with Transactions Costs written by and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Stylianos Perrakis
Publisher :
ISBN 13 :
Total Pages : 47 pages
Book Rating : 4.:/5 (248 download)
Download or read book Option Pricing and Replication with Transaction Costs and Dividends written by Stylianos Perrakis and published by . This book was released on 1999 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Peter Albert Abken
Publisher :
ISBN 13 :
Total Pages : 60 pages
Book Rating : 4.:/5 (199 download)
Download or read book Discrete Option Replication with Transactions Costs written by Peter Albert Abken and published by . This book was released on 1988 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Peter A. Abken
Publisher :
ISBN 13 :
Total Pages : 30 pages
Book Rating : 4.:/5 (877 download)
Download or read book Discrete Option Replication with Transactions Cost written by Peter A. Abken and published by . This book was released on 1988 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Ken Palmer
Publisher :
ISBN 13 :
Total Pages : 21 pages
Book Rating : 4.:/5 (223 download)
Download or read book The Least Cost Super Replicating Portfolio in the Boyle-Vorst Discrete-time Option Pricing Model with Transactions Costs written by Ken Palmer and published by . This book was released on 2001 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: Working in a binomial framework, Boyle and Vorst derived self-financing strategies perfectly replicating the final payoffs to long positions in European call and put options, assuming proportional transactions costs on trades in the stocks. The initial cost of such a strategy yields, by an arbitrage argument, an upper bound for the option price. A lower bound for the option price is obtained by replicating a short position. However, even when a contingent claim has a unique replicating portfolio, there may exist super replicating portfolios of lower cost. Nevertheless, Bensaid, Lesne, Pages and Scheinkman gave conditions under which the cost of the replicating portfolio does not exceed the cost of any super replicating portfolio. These results were generalised by Stettner and Rutkowski to the case of asymmetric transcations costs. Palmer gave a further slight generalisation with what seemed to be a simpler proof. It is known from these results that no super replicating portfolio for long positions in calls and puts can have a lower cost than the replicating portfolio. However, even when a short call or put has a unique replicating portfolio, there may exist super replicating portfolios of lower cost when transactions costs are sufficiently large. Then a lower bound for the call or put price would be the negative of the least possible cost of such a super replicating portfolio. So it is important to be able to calculate this cost. Now the cost of the replicating portfolio can easily be calculated by backward recursion. However, as there are possibly infinitely many super replicating portfolios, it is not immediately obvious how the least possible cost of a super replicating portfolio can be efficiently calculated. The aim of this paper is to show how this cost can be calculated in the one-period case.contemplating priv Ơ
Author : Anthony Neuberger
Publisher :
ISBN 13 :
Total Pages : 25 pages
Book Rating : 4.:/5 (311 download)
Download or read book Option replication with transaction costs : an exact solution for the pure jump process written by Anthony Neuberger and published by . This book was released on 1992 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Nigel J. Cutland
Publisher : Springer Science & Business Media
ISBN 13 : 1447144074
Total Pages : 329 pages
Book Rating : 4.4/5 (471 download)
Download or read book Derivative Pricing in Discrete Time written by Nigel J. Cutland and published by Springer Science & Business Media. This book was released on 2012-09-07 with total page 329 pages. Available in PDF, EPUB and Kindle. Book excerpt: Derivatives are financial entities whose value is derived from the value of other more concrete assets such as stocks and commodities. They are an important ingredient of modern financial markets. This book provides an introduction to the mathematical modelling of real world financial markets and the rational pricing of derivatives, which is part of the theory that not only underpins modern financial practice but is a thriving area of mathematical research. The central theme is the question of how to find a fair price for a derivative; defined to be a price at which it is not possible for any trader to make a risk free profit by trading in the derivative. To keep the mathematics as simple as possible, while explaining the basic principles, only discrete time models with a finite number of possible future scenarios are considered. The theory examines the simplest possible financial model having only one time step, where many of the fundamental ideas occur, and are easily understood. Proceeding slowly, the theory progresses to more realistic models with several stocks and multiple time steps, and includes a comprehensive treatment of incomplete models. The emphasis throughout is on clarity combined with full rigour. The later chapters deal with more advanced topics, including how the discrete time theory is related to the famous continuous time Black-Scholes theory, and a uniquely thorough treatment of American options. The book assumes no prior knowledge of financial markets, and the mathematical prerequisites are limited to elementary linear algebra and probability. This makes it accessible to undergraduates in mathematics as well as students of other disciplines with a mathematical component. It includes numerous worked examples and exercises, making it suitable for self-study.
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.
