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State Dependent Jump Risks And American Option Pricing An Empirical Study Of The Gold Futures Market
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Book Synopsis State-dependent Jump Risks and American Option Pricing: an Empirical Study of the Gold Futures Market by : Yu Min Lian
Download or read book State-dependent Jump Risks and American Option Pricing: an Empirical Study of the Gold Futures Market written by Yu Min Lian and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis An Empirical Investigation of the Market for Comex Gold Futures Options by : Warren Bailey
Download or read book An Empirical Investigation of the Market for Comex Gold Futures Options written by Warren Bailey and published by . This book was released on 1985 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Numerical Solution Of The American Option Pricing Problem, The: Finite Difference And Transform Approaches by : Carl Chiarella
Download or read book Numerical Solution Of The American Option Pricing Problem, The: Finite Difference And Transform Approaches written by Carl Chiarella and published by World Scientific. This book was released on 2014-10-14 with total page 223 pages. Available in PDF, EPUB and Kindle. Book excerpt: The early exercise opportunity of an American option makes it challenging to price and an array of approaches have been proposed in the vast literature on this topic. In The Numerical Solution of the American Option Pricing Problem, Carl Chiarella, Boda Kang and Gunter Meyer focus on two numerical approaches that have proved useful for finding all prices, hedge ratios and early exercise boundaries of an American option. One is a finite difference approach which is based on the numerical solution of the partial differential equations with the free boundary problem arising in American option pricing, including the method of lines, the component wise splitting and the finite difference with PSOR. The other approach is the integral transform approach which includes Fourier or Fourier Cosine transforms. Written in a concise and systematic manner, Chiarella, Kang and Meyer explain and demonstrate the advantages and limitations of each of them based on their and their co-workers' experiences with these approaches over the years.
Book Synopsis An Empirical Investigation of the Market for Comex Gold Futures Options by : Warren Bernard Bailey
Download or read book An Empirical Investigation of the Market for Comex Gold Futures Options written by Warren Bernard Bailey and published by . This book was released on 1987 with total page 19 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Commodity Price Dynamics by : Craig Pirrong
Download or read book Commodity Price Dynamics written by Craig Pirrong and published by Cambridge University Press. This book was released on 2011-10-31 with total page 238 pages. Available in PDF, EPUB and Kindle. Book excerpt: Commodities have become an important component of many investors' portfolios and the focus of much political controversy over the past decade. This book utilizes structural models to provide a better understanding of how commodities' prices behave and what drives them. It exploits differences across commodities and examines a variety of predictions of the models to identify where they work and where they fail. The findings of the analysis are useful to scholars, traders and policy makers who want to better understand often puzzling - and extreme - movements in the prices of commodities from aluminium to oil to soybeans to zinc.
Book Synopsis American Option Pricing in a Jump-Diffusion Model by : Jeremy Berros
Download or read book American Option Pricing in a Jump-Diffusion Model written by Jeremy Berros and published by LAP Lambert Academic Publishing. This book was released on 2010-09 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many alternative models have been developed lately to generalize the Black-Scholes option pricing model in order to incorporate more empirical features. Brownian motion and normal distribution have been used in this Black-Scholes option-pricing framework to model the return of assets. However, two main points emerge from empirical investigations: (i) the leptokurtic feature that describes the return distribution of assets as having a higher peak and two asymmetric heavier tails than those of the normal distribution, and (ii) an empirical phenomenon called "volatility smile" in option markets. Among the recent models that addressed the aforementioned issues is that of Kou (2002), which allows the price of the underlying asset to move according to both Brownian increments and double-exponential jumps. The aim of this thesis is to develop an analytic pricing expression for American options in this model that enables us to e±ciently determine both the price and related hedging parameters.
Book Synopsis A Theoretical and Empirical Study of Options on Default Free Coupon Bonds by : Thomas James Finucane
Download or read book A Theoretical and Empirical Study of Options on Default Free Coupon Bonds written by Thomas James Finucane and published by . This book was released on 1986 with total page 486 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Recovering Jump Risk and Diffusion Parameters Implied by Market Prices of Short-dated Options by : Scott B. Beyer
Download or read book Recovering Jump Risk and Diffusion Parameters Implied by Market Prices of Short-dated Options written by Scott B. Beyer and published by . This book was released on 2003 with total page 358 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation uses option prices from near expiration options to extract jump-risk and volatility parameters. To date, the vast majority of empirical option studies have ignored near expiration, or short-dated options. Many of these studies that ignore short-maturity options cite Rubinstein (1985), who excluded all options with less than 21 days until maturity, due to "nonidealalities". It is important to note, however, that overall trading activity in short-dated options (in the final two weeks of trading) is significant, accounting for 30 to 50 percent of total option volume. Specifically, this dissertation focuses on methods to uncover the jump parameters implied by options with a short time to expiration. Intuitively, consider an option that has one day until expiration. Here, diffusion or volatility will have little, if any, impact, upon option prices even with very large volatility. However, jumps allow for large price moves in a short time interval. As a result, the jump premium should represent a larger portion of the value of an option the closer the option is to expiration. Additionally, because volatility does not have much influence on many short-dated option prices, it is plausible that jump and volatility parameters for short-dated options are largely uncorrelated. It is found that DIFF, the price difference between the NSX and SPX index options, is significant for high moneyness options, call options that are in-the-money and put options that are out-of-the-money. Also, the implied volatility is critically different, at near term maturities under the jump-diffusion model versus the Black and Scholes model. That is, it is found that the volatility distributions are significantly different when generated by the aforementioned models. Furthermore, the volatility of volatility is notably different for high moneyness options nearing expiration. These findings may have a profound impact upon the manner in which option trader hedge their near maturity option positions.
Book Synopsis The Relative Pricing of Actual, Futures, and Options by : Samuel Clyde Weaver
Download or read book The Relative Pricing of Actual, Futures, and Options written by Samuel Clyde Weaver and published by . This book was released on 1985 with total page 133 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Pricing American Options with Jump-diffusion by Monte Carlo Simulation by :
Download or read book Pricing American Options with Jump-diffusion by Monte Carlo Simulation written by and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In recent years the stock markets have shown tremendous volatility with significant spikes and drops in the stock prices. Within the past decade, there have been numerous jumps in the market; one key example was on September 17, 2001 when the Dow industrial average dropped 684 points following the 9-11 attacks on the United States. These evident jumps in the markets show the inaccuracy of the Black-Scholes model for pricing options. Merton provided the first research to appease this problem in 1976 when he extended the Black-Scholes model to include jumps in the market. In recent years, Kou has shown that the distribution of the jump sizes used in Merton's model does not efficiently model the actual movements of the markets. Consequently, Kou modified Merton's model changing the jump size distribution from a normal distribution to the double exponential distribution. Kou's research utilizes mathematical equations to estimate the value of an American put option where the underlying stocks follow a jump-diffusion process. The research contained within this thesis extends on Kou's research using Monte Carlo simulation (MCS) coupled with least-squares regression to price this type of American option. Utilizing MCS provides a continuous exercise and pricing region which is a distinct difference, and advantage, between MCS and other analytical techniques. The aim of this research is to investigate whether or not MCS is an efficient means to pricing American put options where the underlying stock undergoes a jump-diffusion process. This thesis also extends the simulation to utilize copulas in the pricing of baskets, which contains several of the aforementioned type of American options. The use of copulas creates a joint distribution from two independent distributions and provides an efficient means of modeling multiple options and the correlation between them. The research contained within this thesis shows that MCS provides a means of accurately pricing American put options where the underlying stock follows a jump-diffusion. It also shows that it can be extended to use copulas to price baskets of options with jump-diffusion. Numerical examples are presented for both portions to exemplify the excellent results obtained by using MCS for pricing options in both single dimension problems as well as multidimensional problems.
Book Synopsis International Convergence of Capital Measurement and Capital Standards by :
Download or read book International Convergence of Capital Measurement and Capital Standards written by and published by Lulu.com. This book was released on 2004 with total page 294 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis An Empirical Investigation of Geske-Johnson's American Put Option Pricing Model by : Asim Kumar Ghosh
Download or read book An Empirical Investigation of Geske-Johnson's American Put Option Pricing Model written by Asim Kumar Ghosh and published by . This book was released on 1987 with total page 178 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Extracting Risk-Neutral Density and Its Moments from American Option Prices by : Yisong S. Tian
Download or read book Extracting Risk-Neutral Density and Its Moments from American Option Prices written by Yisong S. Tian and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: There has been a surge in the use of option-implied moments (e.g., volatility, skewness and kurtosis) in various empirical applications such as volatility forecasting, variance risk premium, empirical asset pricing, and portfolio selection. One potential obstacle in such applications is the requirement of European option prices in the estimation of these moments. In this paper, we develop a simple, accurate method for extracting risk-neutral density and its moments from American option prices. A key advantage of our approach is that a single implied binomial tree is constructed to fit all American option prices, utilizing the full information set in the entire options market. Since American options are more commonly traded than European options, our methodology expands the scope of research on option-implied density and moments to a much wider class of underlying assets (e.g., equity and futures options).
Book Synopsis Applied Commodity Price Analysis, Forecasting, and Market Risk Management by : NCR-134 (Committee : U.S.). Conference
Download or read book Applied Commodity Price Analysis, Forecasting, and Market Risk Management written by NCR-134 (Committee : U.S.). Conference and published by . This book was released on 1991 with total page 454 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Handbook Of Financial Econometrics, Mathematics, Statistics, And Machine Learning (In 4 Volumes) by : Cheng Few Lee
Download or read book Handbook Of Financial Econometrics, Mathematics, Statistics, And Machine Learning (In 4 Volumes) written by Cheng Few Lee and published by World Scientific. This book was released on 2020-07-30 with total page 5053 pages. Available in PDF, EPUB and Kindle. Book excerpt: This four-volume handbook covers important concepts and tools used in the fields of financial econometrics, mathematics, statistics, and machine learning. Econometric methods have been applied in asset pricing, corporate finance, international finance, options and futures, risk management, and in stress testing for financial institutions. This handbook discusses a variety of econometric methods, including single equation multiple regression, simultaneous equation regression, and panel data analysis, among others. It also covers statistical distributions, such as the binomial and log normal distributions, in light of their applications to portfolio theory and asset management in addition to their use in research regarding options and futures contracts.In both theory and methodology, we need to rely upon mathematics, which includes linear algebra, geometry, differential equations, Stochastic differential equation (Ito calculus), optimization, constrained optimization, and others. These forms of mathematics have been used to derive capital market line, security market line (capital asset pricing model), option pricing model, portfolio analysis, and others.In recent times, an increased importance has been given to computer technology in financial research. Different computer languages and programming techniques are important tools for empirical research in finance. Hence, simulation, machine learning, big data, and financial payments are explored in this handbook.Led by Distinguished Professor Cheng Few Lee from Rutgers University, this multi-volume work integrates theoretical, methodological, and practical issues based on his years of academic and industry experience.
Book Synopsis American Option Pricing Under Stochastic Volatility by : Manisha Goswami
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.
Book Synopsis Testing for Jumps and Modeling Volatility in Asset Prices by : Johan Bjursell
Download or read book Testing for Jumps and Modeling Volatility in Asset Prices written by Johan Bjursell and published by . This book was released on 2009 with total page 320 pages. Available in PDF, EPUB and Kindle. Book excerpt: Observers of financial markets have long noted that asset prices are very volatile and commonly exhibit jumps (price spikes). Thus, the assumption of a continuous process for asset price behavior is often violated in practice. Although empirical studies have found that the impact of such jumps is transitory, the shortterm effect in the volatility may nonetheless be considerable with important financial implications for the valuation of derivatives, asset allocation and risk management. This dissertation contributes to the literature in two areas. First, I evaluate the small sample properties of a nonparametric method for identifying jumps. I focus on the implication of adding noise to the prices and recent methods developed to contend with such market frictions. Initially, I examine the properties and convergence results of the power variations that constitute the jump statistics. Then I document the asymptotic results of these jump statistics. Finally, I estimate their size and power. I examine these properties using a stochastic volatility model incorporating alternative noise and jump processes. I find that the properties of the statistics remain close to the asymptotics when methods for managing the effects of noise are applied judiciously. Improper use leads to invalid tests or tests with low power. Empirical evidence demonstrates that the nonparametric method performs well for alternative models, noise processes, and jump distributions. In the second essay, I present a study on market data from U.S. energy futures markets. I apply a nonparametric method to identify jumps in futures prices of crude oil, heating oil and natural gas contracts traded on the New York Mercantile Exchange. The sample period of the intraday data covers January 1990 to January 2008. Alternative methods such as staggered returns and optimal sampling frequency methods are used to remove the effects of microstructure noise which biases the tests against detecting jumps. I obtain several important empirical results: (i) The realized volatility of natural gas futures exceeds that of heating oil and crude oil. (ii) In these commodities, large volatility days are often associated with large jump components and large jump components are often associated with weekly announcements of inventory levels. (iii) The realized volatility and smooth volatility components in natural gas and heating oil futures are higher in winter months than in summer months. Moreover, cold weather and inventory surprises cause the volatility in natural gas and heating oil to increase during the winter season. (iv) The jump component produces a transitory surge in total volatility, and there is a strong reversal in volatility on days following a significant jump day. (v) I find that including jump and seasonal components as explanatory variables significantly improves the modeling and forecasting of the realized volatility.
