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Accuracy Measures For American Put Option Pricing Algorithms
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Book Synopsis Accuracy Measures for American Put Option Pricing Algorithms by : David H. Goldenberg
Download or read book Accuracy Measures for American Put Option Pricing Algorithms written by David H. Goldenberg and published by . This book was released on 2016 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: I address the dichotomy between American put option pricing theory and the numerical algorithms designed to estimate American put option prices. The literature has focused only on pricing error. However, early exercise is the essence of American option pricing (exercising) and with it comes the possibility of early exercise error and its opportunity costs. I introduce an economically viable metric that identifies all the errors of American put option pricing algorithms. The accuracy of such algorithms can thereby be fully assessed. A rational option pricing result generalises the usual integral equation and motivates pure pricing error. This provides new intuition for the optimality condition for early exercise. Early exercise error is motivated by comparing discounted expected profits generated by the estimated model vs. the optimal early exercise model. The error measure applies to any put pricing algorithm and any benchmark. We illustrate our total error measure with a new algorithm.
Book Synopsis Binomial Bias in Pricing and Early Exercising American Put Options by : David H. Goldenberg
Download or read book Binomial Bias in Pricing and Early Exercising American Put Options written by David H. Goldenberg and published by . This book was released on 2016 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: The binomial algorithm (Cox and Rubinstein, 1985) is an accepted theoretically justifiable standard for measuring the accuracy of American put option pricing algorithms. An important question is whether it also generates accurate estimates of the early exercise boundary (Lamberton, 1993). I show that, in addition to the non-linearity and distribution errors recognised in the literature, the algorithm systematically misprices the early exercise boundary.While convergence to the true boundary ultimately occurs, the convergence rate is slow. An analytic integral equation (Carr et al., 1992) is solved sequentially for the true boundary and is a better benchmark for American put option pricing algorithms.
Book Synopsis Early Exercise Error and the Pricing of American Put Options by : David H. Goldenberg
Download or read book Early Exercise Error and the Pricing of American Put Options written by David H. Goldenberg and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: I introduce an economically viable total error measure appropriate for American put option pricing algorithms which incorporates both pure pricing error and early exercise error. A rational option pricing result that motivates the pure pricing error is derived. Early exercise error is motivated by comparing expected discounted profits from early exercising the estimated model vs. the true optimal early exercise model. The measure applies to any American put option pricing algorithm and is illustrated for a modified Binomial algorithm. Economic significance is defined and early exercise error is seen to be economically significant.
Book Synopsis Speed Versus Accuracy by : Michael A. Craighead
Download or read book Speed Versus Accuracy written by Michael A. Craighead and published by . This book was released on 2001 with total page 118 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis American Put Options by : Donna Salopek
Download or read book American Put Options written by Donna Salopek and published by CRC Press. This book was released on 1997-03-15 with total page 132 pages. Available in PDF, EPUB and Kindle. Book excerpt: An American put option gives its owner the right to sell a share of stock at a given specified price on or before a given date. This book provides a detailed comparison of recent works on the American put option from both theoretical and computational approaches.
Book Synopsis Exotic Option Pricing and Advanced Lévy Models by : Andreas Kyprianou
Download or read book Exotic Option Pricing and Advanced Lévy Models written by Andreas Kyprianou and published by John Wiley & Sons. This book was released on 2006-06-14 with total page 344 pages. Available in PDF, EPUB and Kindle. Book excerpt: Since around the turn of the millennium there has been a general acceptance that one of the more practical improvements one may make in the light of the shortfalls of the classical Black-Scholes model is to replace the underlying source of randomness, a Brownian motion, by a Lévy process. Working with Lévy processes allows one to capture desirable distributional characteristics in the stock returns. In addition, recent work on Lévy processes has led to the understanding of many probabilistic and analytical properties, which make the processes attractive as mathematical tools. At the same time, exotic derivatives are gaining increasing importance as financial instruments and are traded nowadays in large quantities in OTC markets. The current volume is a compendium of chapters, each of which consists of discursive review and recent research on the topic of exotic option pricing and advanced Lévy markets, written by leading scientists in this field. In recent years, Lévy processes have leapt to the fore as a tractable mechanism for modeling asset returns. Exotic option values are especially sensitive to an accurate portrayal of these dynamics. This comprehensive volume provides a valuable service for financial researchers everywhere by assembling key contributions from the world's leading researchers in the field. Peter Carr, Head of Quantitative Finance, Bloomberg LP. This book provides a front-row seat to the hottest new field in modern finance: options pricing in turbulent markets. The old models have failed, as many a professional investor can sadly attest. So many of the brightest minds in mathematical finance across the globe are now in search of new, more accurate models. Here, in one volume, is a comprehensive selection of this cutting-edge research. Richard L. Hudson, former Managing Editor of The Wall Street Journal Europe, and co-author with Benoit B. Mandelbrot of The (Mis)Behaviour of Markets: A Fractal View of Risk, Ruin and Reward
Download or read book GPU Gems 2 written by Matt Pharr and published by Addison-Wesley Professional. This book was released on 2005 with total page 814 pages. Available in PDF, EPUB and Kindle. Book excerpt: More useful techniques, tips, and tricks for harnessing the power of the new generation of powerful GPUs.
Book Synopsis Computational Methods for Option Pricing by : Yves Achdou
Download or read book Computational Methods for Option Pricing written by Yves Achdou and published by SIAM. This book was released on 2005-07-18 with total page 308 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book allows you to understand fully the modern tools of numerical analysis in finance.
Book Synopsis Nonparametric American Option Pricing by : Jamie Alcock
Download or read book Nonparametric American Option Pricing written by Jamie Alcock and published by . This book was released on 2007 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: We introduce a nonparametric method to accurately price American style contingent claims. This method uses only historical stock price data, not option price data, to generate the American option price. We test the accuracy of this method in a controlled experimental environment under both Black amp; Scholes (1973) and Heston (1993) assumptions and perform an error-metric analysis. These numerical experiments demonstrate that this method is an accurate and precise method of pricing American options under a variety of market conditions.
Book Synopsis Mathematical Modeling and Methods of Option Pricing by : Lishang Jiang
Download or read book Mathematical Modeling and Methods of Option Pricing written by Lishang Jiang and published by World Scientific. This book was released on 2005 with total page 344 pages. Available in PDF, EPUB and Kindle. Book excerpt: From the perspective of partial differential equations (PDE), this book introduces the Black-Scholes-Merton's option pricing theory. A unified approach is used to model various types of option pricing as PDE problems, to derive pricing formulas as their solutions, and to design efficient algorithms from the numerical calculation of PDEs.
Book Synopsis Derivatives Analytics with Python by : Yves Hilpisch
Download or read book Derivatives Analytics with Python written by Yves Hilpisch and published by John Wiley & Sons. This book was released on 2015-06-15 with total page 390 pages. Available in PDF, EPUB and Kindle. Book excerpt: Supercharge options analytics and hedging using the power of Python Derivatives Analytics with Python shows you how to implement market-consistent valuation and hedging approaches using advanced financial models, efficient numerical techniques, and the powerful capabilities of the Python programming language. This unique guide offers detailed explanations of all theory, methods, and processes, giving you the background and tools necessary to value stock index options from a sound foundation. You'll find and use self-contained Python scripts and modules and learn how to apply Python to advanced data and derivatives analytics as you benefit from the 5,000+ lines of code that are provided to help you reproduce the results and graphics presented. Coverage includes market data analysis, risk-neutral valuation, Monte Carlo simulation, model calibration, valuation, and dynamic hedging, with models that exhibit stochastic volatility, jump components, stochastic short rates, and more. The companion website features all code and IPython Notebooks for immediate execution and automation. Python is gaining ground in the derivatives analytics space, allowing institutions to quickly and efficiently deliver portfolio, trading, and risk management results. This book is the finance professional's guide to exploiting Python's capabilities for efficient and performing derivatives analytics. Reproduce major stylized facts of equity and options markets yourself Apply Fourier transform techniques and advanced Monte Carlo pricing Calibrate advanced option pricing models to market data Integrate advanced models and numeric methods to dynamically hedge options Recent developments in the Python ecosystem enable analysts to implement analytics tasks as performing as with C or C++, but using only about one-tenth of the code or even less. Derivatives Analytics with Python — Data Analysis, Models, Simulation, Calibration and Hedging shows you what you need to know to supercharge your derivatives and risk analytics efforts.
Book Synopsis American Option Pricing Under GARCH With Non-Normal Innovations by : Jean-Guy Simonato
Download or read book American Option Pricing Under GARCH With Non-Normal Innovations written by Jean-Guy Simonato and published by . This book was released on 2018 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: As it is well known from the time-series literature, GARCH processes with non-normal shocks provide better descriptions of stock returns than GARCH processes with normal shocks. However, in the derivatives literature, American option pricing algorithms under GARCH are typically designed to deal with normal shocks. We thus develop here an approach capable of pricing American options with non-normal shocks. The approach uses an equilibrium pricing model with shocks characterized by a Johnson Su distribution and a simple algorithm inspired from the quadrature approaches recently proposed in the option pricing literature. Numerical experiments calibrated to stock index return data show that this method provides accurate option prices under GARCH for non-normal and normal cases.
Book Synopsis Algorithms and Theory of Computation Handbook, Volume 2 by : Mikhail J. Atallah
Download or read book Algorithms and Theory of Computation Handbook, Volume 2 written by Mikhail J. Atallah and published by CRC Press. This book was released on 2009-11-20 with total page 932 pages. Available in PDF, EPUB and Kindle. Book excerpt: Algorithms and Theory of Computation Handbook, Second Edition: Special Topics and Techniques provides an up-to-date compendium of fundamental computer science topics and techniques. It also illustrates how the topics and techniques come together to deliver efficient solutions to important practical problems.Along with updating and revising many of
Author :Friedhelm Meyer auf der Heide Publisher :Springer Science & Business Media ISBN 13 :3540424938 Total Pages :550 pages Book Rating :4.5/5 (44 download)
Book Synopsis Algorithms - ESA 2001 by : Friedhelm Meyer auf der Heide
Download or read book Algorithms - ESA 2001 written by Friedhelm Meyer auf der Heide and published by Springer Science & Business Media. This book was released on 2001-08-15 with total page 550 pages. Available in PDF, EPUB and Kindle. Book excerpt: It is only during the last decade that the functions of sinusoidal endothelial cells, Kupffer cells, hepatic stellate cells, pit cells and other intrahepatic lymphocytes have been better understood. The development of methods for isolation and co-culturing various types of liver cells has established that they communicate and cooperate via secretion of various intercellular mediators. This monograph summarizes multiple data that suggest the important role of cellular cross-talk for the functions of both normal and diseased liver. Special features of the book include concise presentation of the majority of detailed data in 19 tables. Original schemes allow for the clear illustration of complicated intercellular relationships. This is the first ever presentation of the newly emerging field of liver biology, which is important for hepatic function in health and disease and opens new avenues for therapeutic interventions.
Book Synopsis The Complete Guide to Option Pricing Formulas by : Espen Gaarder Haug
Download or read book The Complete Guide to Option Pricing Formulas written by Espen Gaarder Haug and published by Professional Finance & Investment. This book was released on 2007-01-08 with total page 586 pages. Available in PDF, EPUB and Kindle. Book excerpt: Accompanying CD-ROM contains ... "all pricing formulas, with VBA code and ready-to-use Excel spreadsheets and 3D charts for Greeks (or Option Sensitivities)."--Jacket.
Book Synopsis Numerical Methods in Finance by : René Carmona
Download or read book Numerical Methods in Finance written by René Carmona and published by Springer Science & Business Media. This book was released on 2012-03-23 with total page 478 pages. Available in PDF, EPUB and Kindle. Book excerpt: Numerical methods in finance have emerged as a vital field at the crossroads of probability theory, finance and numerical analysis. Based on presentations given at the workshop Numerical Methods in Finance held at the INRIA Bordeaux (France) on June 1-2, 2010, this book provides an overview of the major new advances in the numerical treatment of instruments with American exercises. Naturally it covers the most recent research on the mathematical theory and the practical applications of optimal stopping problems as they relate to financial applications. By extension, it also provides an original treatment of Monte Carlo methods for the recursive computation of conditional expectations and solutions of BSDEs and generalized multiple optimal stopping problems and their applications to the valuation of energy derivatives and assets. The articles were carefully written in a pedagogical style and a reasonably self-contained manner. The book is geared toward quantitative analysts, probabilists, and applied mathematicians interested in financial applications.
Book Synopsis An Efficient Grid Lattice Algorithm for Pricing American-Style Options by : Zhongkai Liu
Download or read book An Efficient Grid Lattice Algorithm for Pricing American-Style Options written by Zhongkai Liu and published by . This book was released on 2016 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: Option pricing is an important area of research in the finance community. In this paper, we develop a computationally feasible and efficient lattice algorithm in pricing American-style options. The key idea is to build a time adjusted grid lattice model and afterwards implement backward induction to price options. The time adjusted grid lattice guarantees high accuracy in relatively few discrete finite nodes. To illustrate the performance of the lattice algorithm, European and American options are priced separately, and results are compared to other popular methods in terms of both accuracy and efficiency. All suggest that the proposed lattice algorithm does a better job. Moreover, the fast convergence behaviors of the lattice algorithm as well as the relationship between the converged option price and the number of determination dates are studied as well.
