Regime Classification and Stock Loan Valuation

2020 ◽  
Vol 68 (4) ◽  
pp. 965-983
Author(s):  
Ning Cai ◽  
Wei Zhang
Keyword(s):  
Interest Rates ◽  
Optimal Stopping ◽  
Regime Switching ◽  
Classification Problem ◽  
Unified Framework ◽  
Put Options ◽  
American Put Options ◽  
Exponential Lévy Models ◽  
The Interest Rate ◽  
Stock Loan

For traditional perpetual American put options under regime-switching models with positive risk-free interest rates, optimal stopping usually can occur in any regime. Nonetheless, if the risk-free interest rates are allowed to equal zero (the interest rate may drop to zero sometimes in reality), there may exist “continuation regimes” within which optimal stopping can never occur, that is, within which stopping is never optimal. A natural problem is “regime classification,” that is, determination of all continuation regimes. In “Regime Classification and Stock Loan Valuation,” Ning Cai and Wei Zhang develop a unified, fixed point approach to solving this regime classification problem under general regime-switching exponential Levy models with any finite numbers of regimes and general Levy types. Applying this result, they also provide a unified framework for the valuation of infinite maturity stock loans under general regime-switching exponential Levy models.

scholarly journals On the Pricing of American Options in Exponential Lévy Markets

2007 ◽  
Vol 44 (2) ◽  
pp. 409-419 ◽  
Author(s):  
Roman V. Ivanov
Keyword(s):  
Large Class ◽  
Optimal Stopping ◽  
Infinite Horizon ◽  
Market Model ◽  
Security Market ◽  
Put Options ◽  
No Arbitrage ◽  
American Put Options ◽  
Explicit Bounds ◽  
American Put

In this paper, we discuss the problem of the pricing of American-style options in the exponential Lévy security market model. This model is typically incomplete, and we derive the explicit bounds of the interval of no arbitrage prices and the related optimal stopping moments for American put options and American call options in both finite and infinite horizon time. We consider a large class of Lévy processes.

scholarly journals Option Pricing, Zero Lower Bound, and COVID-19

Risks ◽  
2021 ◽  
Vol 9 (9) ◽  
pp. 167
Author(s):  
Giacomo Morelli ◽  
Lea Petrella
Keyword(s):  
Lower Bound ◽  
Interest Rates ◽  
Quantitative Assessment ◽  
Zero Lower Bound ◽  
European Options ◽  
Equity Options ◽  
Put Options ◽  
American Put Options ◽  
Federal National Mortgage Association ◽  
American Put

This paper provides a quantitative assessment of equity options priced at the Zero Lower Bound, i.e., when interest rates are set essentially to zero. We obtain closed form formulas for American options when the Zero Lower Bound policy holds. We perform numerical implementation of American put options written on the stock Federal National Mortgage Association (FNMA) and of related bounds for the optimal exercise. The results show similarities with the corresponding European options priced at the Zero Lower Bound during the COVID-19 crisis.

A MULTIVARIATE REGIME SWITCHING APPROACH TO THE RELATION BETWEEN THE STOCK MARKET, THE INTEREST RATE AND OUTPUT

2008 ◽  
Vol 11 (07) ◽  
pp. 657-671 ◽  
Author(s):  
ANGELOS KANAS
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Stock Returns ◽  
Regime Switching ◽  
Impulse Responses ◽  
Real Activity ◽  
The Us ◽  
High Volatility ◽  
Dynamic Relations ◽  
The Interest Rate

This paper presents empirical evidence that the relation between stock returns, real activity and interest rates for the US is regime dependent. Fixed exchange rates, and interest rate targeting are associated with a regime in which the joint behavior of these three variables is characterized by low volatility, whilst monetary aggregates targeting is associated with a high volatility regime. Both the contemporaneous and the dynamic relations change across regimes. Regime-dependent dynamic effects arise from interest rates to real activity, from stock returns to real activity and interest rates, and from real activity to interest rates. Dynamic impulse responses also vary across regimes.

scholarly journals Estimating the Early Exercise Premium of American Put Index Options

2009 ◽  
Author(s):  
Ako Doffou
Keyword(s):  
Interest Rates ◽  
Test Results ◽  
Quality Test ◽  
Index Options ◽  
Put Options ◽  
Early Exercise ◽  
Accuracy Test ◽  
American Put Options ◽  
American Put ◽  
Early Exercise Premium

This paper examines empirically the value of early exercise by testing the ability of two American put valuation models to predict the early exercise premium for the S&P 100 American put options. An accuracy test and a quality test are performed on (1) the MacMillan and Barone-Adesi and Whaley model, and (2) the Carr, Jarrow and Myneni model. The test results show that early exercise premium is significant regardless of moneyness. Moreover, consistent with the theory, the value of early exercise is significantly negatively related to moneyness and interest rates and significantly positively related to time to maturity and to the volatility of the underlying index. Both American put valuation models examined do not fully capture the value of early exercise embedded in American put prices.  

On the Pricing of American Options in Exponential Lévy Markets

2007 ◽  
Vol 44 (02) ◽  
pp. 409-419
Author(s):  
Roman V. Ivanov
Keyword(s):  
Large Class ◽  
Optimal Stopping ◽  
Infinite Horizon ◽  
Market Model ◽  
Security Market ◽  
Put Options ◽  
No Arbitrage ◽  
American Put Options ◽  
Explicit Bounds ◽  
American Put

In this paper, we discuss the problem of the pricing of American-style options in the exponential Lévy security market model. This model is typically incomplete, and we derive the explicit bounds of the interval of no arbitrage prices and the related optimal stopping moments for American put options and American call options in both finite and infinite horizon time. We consider a large class of Lévy processes.

scholarly journals On the Pricing of American Options in Exponential Lévy Markets

2007 ◽  
Vol 44 (02) ◽  
pp. 409-419
Author(s):  
Roman V. Ivanov
Keyword(s):  
Large Class ◽  
Optimal Stopping ◽  
Infinite Horizon ◽  
Market Model ◽  
Security Market ◽  
Put Options ◽  
No Arbitrage ◽  
American Put Options ◽  
Explicit Bounds ◽  
American Put

In this paper, we discuss the problem of the pricing of American-style options in the exponential Lévy security market model. This model is typically incomplete, and we derive the explicit bounds of the interval of no arbitrage prices and the related optimal stopping moments for American put options and American call options in both finite and infinite horizon time. We consider a large class of Lévy processes.

DETERMINAN INFLASI DI INDONESIA PERIODE 1980-2015

2016 ◽  
Vol 21 (1) ◽  
pp. 1-7
Author(s):  
Risna Risna
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Money Supply ◽  
Government Spending ◽  
Positive Impact ◽  
Secondary Data ◽  
Quantitative Approach ◽  
State Spending ◽  
Factors Affecting ◽  
The Interest Rate

This study aims to determine the effect of government spending, the money supply, the interest rate of Bank Indonesia against inflation.This study uses secondary data. Secondary data were obtained directly from the Central Bureau of Statistics and Bank Indonesia. It can be said that there are factors affecting inflationas government spending, money supply, and interest rates BI. The reseach uses a quantitative approach to methods of e-views in the data. The results of analysis of three variables show that state spending significantand positive impact on inflationin Indonesia, the money supply significantand negative to inflationin Indonesia, BI rate a significantand positive impact on inflation in Indonesia

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