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Static Hedging And Pricing American Knock Out Options
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Book Synopsis Static Hedging and Pricing American Knock-Out Options by : Chung San-Lin
Download or read book Static Hedging and Pricing American Knock-Out Options written by Chung San-Lin and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper extends the static hedge portfolio (SHP) approach of Derman, Ergener, and Kani (1995) and Carr, Ellis, and Gupta (1998) to price and/or hedge American knock-out options. We construct a SHP to match the complicated boundary conditions of American barrier options. Detailed analyses of the profit and loss distributions suggest that the hedging effectiveness of a bi-monthly SHP is far less risky than that of a delta-hedging portfolio with daily rebalance. Moreover, numerical results indicate that the efficiency of the proposed method is comparable to Boyle and Tian (1999) for pricing American knock-out options under the constant elasticity of variance (CEV) model of Cox (1975). In particular, the recalculation of the option prices and hedge ratios under the proposed method is much easier and quicker than the tree methods.
Book Synopsis Static Hedging and Pricing American Options by : San-Lin Chung
Download or read book Static Hedging and Pricing American Options written by San-Lin Chung and published by . This book was released on 2008 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper utilizes the static portfolio approach of Derman, Ergener, and Kani (1995) and Carr, Ellis, and Gupta (1998) to hedge and price American options under the Black-Scholes (1973) model and the constant elasticity of variance (CEV) model of Cox (1975). The static hedge portfolio (SHP) of an American option is formulated by applying the value-matching and smooth-pasting conditions at the early exercise boundaries. The numerical results indicate that the pricing efficiency of our static hedging approach is comparable to some recent advanced numerical methods such as Broadie and Detemple's (1996) binomial Black-Scholes method with Richardson extrapolation (BBSR). Furthermore, our static hedging approach provides simple and intuitive derivations of the early exercise boundaries near expiration.
Download or read book Static Vs Dynamic Hedging written by and published by . This book was released on 1997 with total page 272 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis A Replication Method of Generalized Static Hedging of Pricing American Options by :
Download or read book A Replication Method of Generalized Static Hedging of Pricing American Options written by and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Generalized Static Hedging Method of American Up-and-out Put Options Under Stochastic Volatility Model by : 楊承憲
Download or read book Generalized Static Hedging Method of American Up-and-out Put Options Under Stochastic Volatility Model written by 楊承憲 and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Robust Static Super-replication of Barrier Options by : Jan H. Maruhn
Download or read book Robust Static Super-replication of Barrier Options written by Jan H. Maruhn and published by Walter de Gruyter. This book was released on 2009 with total page 210 pages. Available in PDF, EPUB and Kindle. Book excerpt: Static hedge portfolios for barrier options are very sensitive with respect to changes of the volatility surface. To prevent potentially significant hedging losses this book develops a static super-replication strategy with market-typical robustness against volatility, skew and liquidity risk as well as model errors. Empirical results and various numerical examples confirm that the static superhedge successfully eliminates the risk of a changing volatility surface. Combined with associated sub-replication strategies this leads to robust price bounds for barrier options which are also relevant in the context of dynamic hedging. The mathematical techniques used to prove appropriate existence, duality and convergence results range from financial mathematics, stochastic and semi-infinite optimization, convex analysis and partial differential equations to semidefinite programming.
Book Synopsis Dynamic Hedging by : Nassim Nicholas Taleb
Download or read book Dynamic Hedging written by Nassim Nicholas Taleb and published by John Wiley & Sons. This book was released on 1997-01-14 with total page 536 pages. Available in PDF, EPUB and Kindle. Book excerpt: Destined to become a market classic, Dynamic Hedging is the only practical reference in exotic options hedgingand arbitrage for professional traders and money managers Watch the professionals. From central banks to brokerages to multinationals, institutional investors are flocking to a new generation of exotic and complex options contracts and derivatives. But the promise of ever larger profits also creates the potential for catastrophic trading losses. Now more than ever, the key to trading derivatives lies in implementing preventive risk management techniques that plan for and avoid these appalling downturns. Unlike other books that offer risk management for corporate treasurers, Dynamic Hedging targets the real-world needs of professional traders and money managers. Written by a leading options trader and derivatives risk advisor to global banks and exchanges, this book provides a practical, real-world methodology for monitoring and managing all the risks associated with portfolio management. Nassim Nicholas Taleb is the founder of Empirica Capital LLC, a hedge fund operator, and a fellow at the Courant Institute of Mathematical Sciences of New York University. He has held a variety of senior derivative trading positions in New York and London and worked as an independent floor trader in Chicago. Dr. Taleb was inducted in February 2001 in the Derivatives Strategy Hall of Fame. He received an MBA from the Wharton School and a Ph.D. from University Paris-Dauphine.
Book Synopsis Pricing and static hedging of foreign exchange barrier options by : Kacper Jurga
Download or read book Pricing and static hedging of foreign exchange barrier options written by Kacper Jurga and published by . This book was released on 2012 with total page 196 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Static Hedge of American Option with Stochastic Volatility Conditional on the Asset Price by : 藍景奕
Download or read book Static Hedge of American Option with Stochastic Volatility Conditional on the Asset Price written by 藍景奕 and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Static Hedging and Pricing of Exotic Options with Payoff Frames by : Justin Kirkby
Download or read book Static Hedging and Pricing of Exotic Options with Payoff Frames written by Justin Kirkby and published by . This book was released on 2018 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a general framework for statically hedging European-style options with nonstandard terminal payoffs which can be applied to mixed static-dynamic and semi-static hedges for many path dependent exotic options. This framework provides a new model-free method of derivatives pricing that builds on recent advances in transform-based numerical approaches. The goal is achieved by separating the hedging and pricing problems to obtain model-free replicating strategies. Once prices have been obtained for a set of basis payoffs, the pricing and hedging of financial securities with arbitrary payoffs functions is accomplished by computing a set of "hedge coefficients" for that security. This method is particularly well suited for pricing baskets of options simultaneously, and is robust to discontinuities of payoffs. In addition, the method enables a systematic comparison of the value of a payoff (or portfolio) across a set of competing model specifications with implications for security design.
Book Synopsis A General Treatment of Barrier Options by : Alessandro Sbuelz
Download or read book A General Treatment of Barrier Options written by Alessandro Sbuelz and published by . This book was released on 1998 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: This article offers a general unifying treatment of barrier options. The unifying treatment is based on a general representation of the risk-neutral density of the absorbed return process of the underlying asset: the quot;convolution density.quot; On the basis of the convolution density, the article establishes relationships between plain and barrier options as well as knock-outs and knock-ins: the quot;plain/knock parities.quot; The plain/knock parities provide new static hedging strategies for the replication of double barrier options; a double barrier option is a portfolio of single barrier options. The article then derives new representations for the analytical solution of option prices in the double barrier setting. For the first time, the analytical solution of the price of the contract with a single knock-in triggering a single knock-out is offered, and new representations of the analytical solution of the price of double knock-ins and knock-outs are also offered. The form of these analytical solutions is a series which absolutely converges at a very high rate.
Book Synopsis Super-Hedging American Options with Semi-Static Trading Strategies Under Model Uncertainty by : Erhan Bayraktar
Download or read book Super-Hedging American Options with Semi-Static Trading Strategies Under Model Uncertainty written by Erhan Bayraktar and published by . This book was released on 2016 with total page 8 pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider the super-hedging price of an American option in a discrete-time market in which stocks are available for dynamic trading and European options are available for static trading. We show that the super-hedging price is given by the supremum over the prices of the American option under randomized models.
Book Synopsis Hedging Vanilla and Exotic Options by :
Download or read book Hedging Vanilla and Exotic Options written by and published by . This book was released on 1997 with total page 100 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Pricing and Static Hedging Discrete Up-and-out Call by : 蔡欣蒼
Download or read book Pricing and Static Hedging Discrete Up-and-out Call written by 蔡欣蒼 and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis FX Options and Structured Products by : Uwe Wystup
Download or read book FX Options and Structured Products written by Uwe Wystup and published by John Wiley & Sons. This book was released on 2017-06-30 with total page 649 pages. Available in PDF, EPUB and Kindle. Book excerpt: Advanced Guidance to Excelling in the FX Market Once you have a textbook understanding of money market and foreign exchange products, turn to FX Options and Structured Products, Second Edition, for the beyond-vanilla options strategies and traded deals proven superior in today’s post-credit crisis trading environment. With the thoroughness and balance of theory and practice only Uwe Wystup can deliver, this fully revised edition offers authoritative solutions for the real world in an easy-to-access format. See how specific products actually work through detailed case studies featuring clear examples of FX options, common structures and custom solutions. This complete resource is both a wellspring of ideas and a hands-on guide to structuring and executing your own strategies. Distinguish yourself with a valued skillset by: Working through practical and thought-provoking challenges in more than six dozen exercises, all with complete solutions in a companion volume Gaining a working knowledge of the latest, most popular products, including accumulators, kikos, target forwards and more Getting close to the everyday realities of the FX derivatives market through new, illuminating case studies for corporates, municipalities and private banking FX Options and Structured Products, Second Edition is your go-to road map to the exotic options in FX derivatives.
Book Synopsis Arbitrage, Hedging and Utility Maximization Using Semi-Static Trading Strategies with American Options by : Erhan Bayraktar
Download or read book Arbitrage, Hedging and Utility Maximization Using Semi-Static Trading Strategies with American Options written by Erhan Bayraktar and published by . This book was released on 2015 with total page 14 pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider a financial model where stocks are available for dynamic trading, and European and American options are available for static trading (semi-static trading strategies). We assume that the American options are infinitely divisible, and can only be bought but not sold. We first get the fundamental theorem of asset pricing (FTAP) using semi-static trading strategies. Using the FTAP result, we further get the dualities for the hedging prices of European and American options. Based on the hedging dualities, we also get the duality for the utility maximization involving semi-static trading strategies.
Book Synopsis Exotic Options Trading by : Frans de Weert
Download or read book Exotic Options Trading written by Frans de Weert and published by John Wiley & Sons. This book was released on 2011-01-19 with total page 255 pages. Available in PDF, EPUB and Kindle. Book excerpt: Written by an experienced trader and consultant, Frans de Weert’s Exotic Options Trading offers a risk-focused approach to the pricing of exotic options. By giving readers the necessary tools to understand exotic options, this book serves as a manual to equip the reader with the skills to price and risk manage the most common and the most complex exotic options. De Weert begins by explaining the risks associated with trading an exotic option before dissecting these risks through a detailed analysis of the actual economics and Greeks rather than solely stating the mathematical formulae. The book limits the use of mathematics to explain exotic options from an economic and risk perspective by means of real life examples leading to a practical interpretation of the mathematical pricing formulae. The book covers conventional options, digital options, barrier options, cliquets, quanto options, outperformance options and variance swaps, and explains difficult concepts in simple terms, with a practical approach that gives the reader a full understanding of every aspect of each exotic option. The book also discusses structured notes with exotic options embedded in them, such as reverse convertibles, callable and puttable reverse convertibles and autocallables and shows the rationale behind these structures and their associated risks. For each exotic option, the author makes clear why there is an investor demand; explains where the risks lie and how this affects the actual pricing; shows how best to hedge any vega or gamma exposure embedded in the exotic option and discusses the skew exposure. By explaining the practical implications for every exotic option and how it affects the price, in addition to the necessary mathematical derivations and tools for pricing exotic options, Exotic Options Trading removes the mystique surrounding exotic options in order to give the reader a full understanding of every aspect of each exotic option, creating a useable tool for dealing with exotic options in practice. “Although exotic options are not a new subject in finance, the coverage traditionally afforded by many texts is either too high level or overly mathematical. De Weert's exceptional text fills this gap superbly. It is a rigorous treatment of a number of exotic structures and includes numerous examples to clearly illustrate the principles. What makes this book unique is that it manages to strike a fantastic balance between the theory and actual trading practice. Although it may be something of an overused phrase to describe this book as compulsory reading, I can assure any reader they will not be disappointed.” —Neil Schofield, Training Consultant and author of Commodity Derivatives: Markets and Applications “Exotic Options Trading does an excellent job in providing a succinct and exhaustive overview of exotic options. The real edge of this book is that it explains exotic options from a risk and economical perspective and provides a clear link to the actual profit and pricing formulae. In short, a must read for anyone who wants to get deep insights into exotic options and start trading them profitably.” —Arturo Bignardi
