scholarly journals Valuing Time-Dependent CEV Barrier Options

2009 ◽  
Vol 2009 ◽  
pp. 1-17 ◽  
Author(s):  
C. F. Lo ◽  
H. M. Tang ◽  
K. C. Ku ◽  
C. H. Hui
Keyword(s):  
Interest Rates ◽  
Lower Bounds ◽  
Time Dependent ◽  
Upper And Lower Bounds ◽  
Model Parameters ◽  
Option Prices ◽  
Barrier Option ◽  
Cev Model ◽  
Valuation Model ◽  
Similarity Transformations

We have derived the analytical kernels of the pricing formulae of the CEV knockout options with time-dependent parameters for a parametric class of moving barriers. By a series of similarity transformations and changing variables, we are able to reduce the pricing equation to one which is reducible to the Bessel equation with constant parameters. These results enable us to develop a simple and efficient method for computing accurate estimates of the CEV single-barrier option prices as well as their upper and lower bounds when the model parameters are time-dependent. By means of the multistage approximation scheme, the upper and lower bounds for the exact barrier option prices can be efficiently improved in a systematic manner. It is also natural that this new approach can be easily applied to capture the valuation of other standard CEV options with specified moving knockout barriers. In view of the CEV model being empirically considered to be a better candidate in equity option pricing than the traditional Black-Scholes model, more comparative pricing and precise risk management in equity options can be achieved by incorporating term structures of interest rates, volatility, and dividend into the CEV option valuation model.

CONSTANT ELASTICITY OF VARIANCE OPTION PRICING MODEL WITH TIME-DEPENDENT PARAMETERS

2000 ◽  
Vol 03 (04) ◽  
pp. 661-674 ◽  
Author(s):  
C. F. LO ◽  
P. H. YUEN ◽  
C. H. HUI
Keyword(s):  
Option Pricing ◽  
Algebraic Approach ◽  
Time Dependent ◽  
Model Parameters ◽  
Cev Model ◽  
Constant Elasticity ◽  
Constant Elasticity Of Variance ◽  
Pricing Options ◽  
Term Structures ◽  
Option Values

This paper provides a method for pricing options in the constant elasticity of variance (CEV) model environment using the Lie-algebraic technique when the model parameters are time-dependent. Analytical solutions for the option values incorporating time-dependent model parameters are obtained in various CEV processes with different elasticity factors. The numerical results indicate that option values are sensitive to volatility term structures. It is also possible to generate further results using various functional forms for interest rate and dividend term structures. Furthermore, the Lie-algebraic approach is very simple and can be easily extended to other option pricing models with well-defined algebraic structures.

Upper and Lower Bounds for the Parameters of One-Dimensional Theories for Sandwich Fracture Specimens

2020 ◽  
Vol 88 (3) ◽  
Author(s):  
Roberta Massabò
Keyword(s):  
Crack Length ◽  
Lower Bounds ◽  
Beam Theory ◽  
Approximate Solutions ◽  
Upper And Lower Bounds ◽  
Model Parameters ◽  
One Dimensional ◽  
Limit Value ◽  
Elastic Mismatch ◽  
Fracture Specimens

Abstract Upper and lower bounds for the parameters of one-dimensional theories used in the analysis of sandwich fracture specimens are derived by matching the energy release rate with two-dimensional elasticity solutions. The theory of a beam on an elastic foundation and modified beam theory are considered. Bounds are derived analytically for foundation modulus and crack length correction in single cantilever beam (SCB) sandwich specimens and verified using accurate finite element results and experimental data from the literature. Foundation modulus and crack length correction depend on the elastic mismatch between face sheets and core and are independent of the core thickness if this is above a limit value, which also depends on the elastic mismatch. The results in this paper clarify conflicting results in the literature, explain the approximate solutions, and highlight their limitations. The bounds of the model parameters can be applied directly to specimens satisfying specific geometrical/material ratios, which are given in the paper, or used to support and validate numerical calculations and define asymptotic limits.

OPTION RISK MEASUREMENT WITH TIME-DEPENDENT PARAMETERS

2000 ◽  
Vol 03 (03) ◽  
pp. 581-589 ◽  
Author(s):  
C. F. LO ◽  
P. H. YUEN ◽  
C. H. HUI
Keyword(s):  
Interest Rate ◽  
Option Pricing ◽  
Risk Measurement ◽  
Time Dependent ◽  
Model Parameters ◽  
Cev Model ◽  
Equity Options ◽  
Market Values ◽  
Term Structures ◽  
Option Values

In value-at-risk (VaR) methodology of option risk measurement, the determination of market values of the current option positions under various market scenarios is critical. Under the full revaluation and factor sensitivity approach which are accepted by regulators, accurate revaluation and precise factor sensitivity calculation of options in response to significant moves in market variables are important for measuring option risks in terms of VaR figures. This paper provides a method for pricing equity options in the constant elasticity variance (CEV) model environment using the Lie-algebraic technique when the model parameters are time-dependent. Analytical solutions for option values incorporating time-dependent model parameters are obtained in various CEV processes. The numerical results, which are obtained by employing a very efficient computing algorithm similar to the one proposed by Schroder [11], indicate that the option values are sensitive to the time-dependent volatility term structures. It is also possible to generate further results using various functional forms for interest rate and dividend term structures. From the analytical option pricing formulae, one can achieve more accuracy to compute factor sensitivities using more realistic term-structures in volatility, interest rate and dividend yield. In view of the CEV model being empirically considered to be a better candidate in equity option pricing than the traditional Black–Scholes model, more precise risk management in equity options can be achieved by incorporating term-structures of interest rates, volatility and dividend into the CEV option valuation model.

9.—Bivariational Bounds associated with Non-self-adjoint Linear Operators

1976 ◽  
Vol 75 (2) ◽  
pp. 109-118 ◽  
Author(s):  
Michael F. Barnsley ◽  
Peter D. Robinson
Keyword(s):  
Hilbert Space ◽  
Lower Bounds ◽  
Positive Constant ◽  
Real Hilbert Space ◽  
Linear Operators ◽  
Time Dependent ◽  
Diffusion Equations ◽  
Inner Product ◽  
Upper And Lower Bounds ◽  
Fredholm Integral Equations

SYNOPSISLet A be a closed linear transformation from a real Hilbert space ℋ, with symmetric inner product 〈, 〉, into itself; and let f ∈ ℋ be given such that the problem Aø = f has a solution ø ∈ D(A), the domain of A. Then bivariational upper and lower bounds on 〈g, ø〉 for any g ∈ ℋ are exhibited when there exists a positive constant a such that 〈AΦ, AΦ⊖ ≧ a2〈Φ, Φ〉 for all Φ ∈ D(A). The applicability of the theory both to Fredholm integral equations and also to time-dependent diffusion equations is demonstrated.

scholarly journals Improved lower bounds for the motion of moving boundaries

1984 ◽  
Vol 26 (2) ◽  
pp. 165-175 ◽  
Author(s):  
James M. Hill ◽  
Jeffrey N. Dewynne
Keyword(s):  
Lower Bound ◽  
Lower Bounds ◽  
Stefan Problem ◽  
Moving Boundary ◽  
Classical Problem ◽  
Moving Boundaries ◽  
Surface Radiation ◽  
Time Dependent ◽  
Upper And Lower Bounds ◽  
Surface Conditions

AbstractIn a recent paper the authors give upper and lower bounds for the motion of the moving boundary for the classical Stefan problem for plane, cylindrical and spherical geometries. On comparison with the exact Neumann solution for the plane geometry and no surface radiation the bounds obtained are seen to be quite adequate for practical purposes except for the lower bound at small Stefan numbers. Here improved lower bounds are obtained which in some measure remove this inadequacy. Time dependent surface conditions are also examined and the new lower bounds obtained for the classical problem are illustrated numerically.

A NOTE ON RISKY BOND VALUATION

2000 ◽  
Vol 03 (03) ◽  
pp. 575-580 ◽  
Author(s):  
C. H. HUI ◽  
C. F. LO
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Firm Value ◽  
Closed Form Solution ◽  
Corporate Bond ◽  
Future Research ◽  
Model Parameters ◽  
Valuation Model ◽  
Bond Valuation ◽  
Bond Function

This paper develops a corporate bond valuation model that incorporates a default barrier with dynamics depending on stochastic interest rates and variance of the corporate bond function. Since the volatility of the firm value affects the level of leverage over time through the variance of the corporate bond function, more realistic default scenarios can be put into the valuation model. When the firm value touches the barrier, bondholders receive an exogenously specified number of riskless bonds. We derive a closed-form solution of the corporate bond price as a function of firm value and a short-term interest rate, with time-dependent model parameters governing the dynamics of the firm value and interest rate. The numerical results show that the dynamics of the barrier has material impact on the term structures of credit spreads. This model provides new insight for future research on risky corporate bonds analysis and modelling credit risk.

scholarly journals On the Generalized Distance Energy of Graphs

Mathematics ◽  
2019 ◽  
Vol 8 (1) ◽  
pp. 17 ◽  
Author(s):  
Abdollah Alhevaz ◽  
Maryam Baghipur ◽  
Hilal A. Ganie ◽  
Yilun Shang
Keyword(s):  
Lower Bounds ◽  
Complete Graph ◽  
Connected Graph ◽  
Distance Matrix ◽  
Wiener Index ◽  
Diagonal Matrix ◽  
Upper And Lower Bounds ◽  
Star Graph ◽  
Extremal Graphs ◽  
Generalized Distance

The generalized distance matrix D α ( G ) of a connected graph G is defined as D α ( G ) = α T r ( G ) + ( 1 − α ) D ( G ) , where 0 ≤ α ≤ 1 , D ( G ) is the distance matrix and T r ( G ) is the diagonal matrix of the node transmissions. In this paper, we extend the concept of energy to the generalized distance matrix and define the generalized distance energy E D α ( G ) . Some new upper and lower bounds for the generalized distance energy E D α ( G ) of G are established based on parameters including the Wiener index W ( G ) and the transmission degrees. Extremal graphs attaining these bounds are identified. It is found that the complete graph has the minimum generalized distance energy among all connected graphs, while the minimum is attained by the star graph among trees of order n.

scholarly journals Hadamard k-fractional inequalities of Fejér type for GA-s-convex mappings and applications

2019 ◽  
Vol 2019 (1) ◽  
Author(s):  
Hui Lei ◽  
Gou Hu ◽  
Zhi-Jie Cao ◽  
Ting-Song Du
Keyword(s):  
Lower Bounds ◽  
Hypergeometric Functions ◽  
Upper And Lower Bounds ◽  
Weighted Inequalities ◽  
Convex Mappings ◽  
Special Means

Abstract The main aim of this paper is to establish some Fejér-type inequalities involving hypergeometric functions in terms of GA-s-convexity. For this purpose, we construct a Hadamard k-fractional identity related to geometrically symmetric mappings. Moreover, we give the upper and lower bounds for the weighted inequalities via products of two different mappings. Some applications of the presented results to special means are also provided.

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