scholarly journals On Option Greeks and Corporate Finance

2020 ◽  
Vol 11 (2) ◽  
pp. 183
Author(s):  
Kuo-Ping CHANG
Keyword(s):  
Option Pricing ◽  
Lower Bounds ◽  
Theory Of The Firm ◽  
Convertible Bond ◽  
Upper And Lower Bounds ◽  
Pricing Model ◽  
Put Option ◽  
Black Scholes ◽  
Option Pricing Model ◽  
American Put

This paper has proposed new option Greeks and new upper and lower bounds for European and American options. It shows that because of the put-call parity, the Greeks of put and call options are interconnected and should be shown simultaneously. In terms of the theory of the firm, it is found that both the Black-Scholes-Merton and the binomial option pricing models implicitly assume that maximizing the market value of the firm is not equivalent to maximizing the equityholders’ wealth. The binomial option pricing model implicitly assumes that further increasing (decreasing) the promised payment to debtholders affects neither the speed of decreasing (increasing) in the equity nor the speed of increasing (decreasing) in the insurance for the promised payment. The Black-Scholes-Merton option pricing model implicitly assumes that further increasing (decreasing) in the promised payment to debtholders will: (1) decrease (increase) the speed of decreasing (increasing) in the equity though bounded by upper and lower bounds, and (2) increase (decrease) the speed of increasing (decreasing) in the insurance though bounded by upper and lower bounds. The paper also extends the put-call parity to include senior debt and convertible bond. It specifies the lower bound for risky debt and the conditions under which American put option will not be early exercised.

scholarly journals A Comparison of the Black-Scholes Option Pricing Model and Its Alternatives

2019 ◽  
Vol 67 (2) ◽  
pp. 105-110
Author(s):  
ABM Shahadat Hossain ◽  
Maliha Tasmiah Noushin ◽  
Kamrul Hasan
Keyword(s):  
Option Pricing ◽  
Option Price ◽  
Pricing Model ◽  
Cev Model ◽  
Constant Elasticity ◽  
Constant Elasticity Of Variance ◽  
Elasticity Parameter ◽  
Put Option ◽  
Black Scholes ◽  
Option Pricing Model

In this paper we estimate European put option price by using awell-established option pricing model, namely, the Constant Elasticity of Variance (CEV) model for the elasticity parameter β< 2 and then compare it with the benchmark Black-Scholes (BS) model. We calculate the Greeks under the CEV model for β=0,1 and 1.95 and compare them with that of the B-S one. Finally, we investigate the put price and Greeks values for at-the-money (ATM), in-the-money (ITM) and out-of-the-money (OTM) situations. Dhaka Univ. J. Sci. 67(2): 105-110, 2019 (July)

scholarly journals Empirical Performance of Black-Scholes and GARCH Option Pricing Models during Turbulent Times: The Indian Evidence

2016 ◽  
Vol 8 (3) ◽  
pp. 123
Author(s):  
Aparna Bhat ◽  
Kirti Arekar
Keyword(s):  
Option Pricing ◽  
Closed Form Solution ◽  
Time Varying ◽  
Pricing Model ◽  
Currency Options ◽  
Pricing Models ◽  
Pricing Options ◽  
Volatility Model ◽  
Black Scholes ◽  
Option Pricing Model

Exchange-traded currency options are a recent innovation in the Indian financial market and their pricing is as yet unexplored. The objective of this research paper is to empirically compare the pricing performance of two well-known option pricing models – the Black-Scholes-Merton Option Pricing Model (BSM) and Duan’s NGARCH option pricing model – for pricing exchange-traded currency options on the US dollar-Indian rupee during a recent turbulent period. The BSM is known to systematically misprice options on the same underlying asset but with different strike prices and maturities resulting in the phenomenon of the ‘volatility smile’. This bias of the BSM results from its assumption of a constant volatility over the option’s life. The NGARCH option pricing model developed by Duan is an attempt to incorporate time-varying volatility in pricing options. It is a deterministic volatility model which has no closed-form solution and therefore requires numerical techniques for evaluation. In this paper we have compared the pricing performance and examined the pricing bias of both models during a recent period of volatility in the Indian foreign exchange market. Contrary to our expectations the pricing performance of the more sophisticated NGARCH pricing model is inferior to that of the relatively simple BSM model. However orthogonality tests demonstrate that the NGARCH model is free of the strike price and maturity biases associated with the BSM. We conclude that the deterministic BSM does a better job of pricing options than the more advanced time-varying volatility model based on GARCH.

scholarly journals Nonparametric Estimation of Fractional Option Pricing Model

2020 ◽  
Vol 2020 ◽  
pp. 1-8
Author(s):  
Qing Li ◽  
Songlin Liu ◽  
Misi Zhou
Keyword(s):  
Option Pricing ◽  
Stock Exchange ◽  
Option Price ◽  
Integral Function ◽  
The State ◽  
Pricing Model ◽  
State Price ◽  
Black Scholes ◽  
Option Pricing Model ◽  
State Price Density

The establishment of the fractional Black–Scholes option pricing model is under a major condition with the normal distribution for the state price density (SPD) function. However, the fractional Brownian motion is deemed to not be martingale with a long memory effect of the underlying asset, so that the estimation of the state price density (SPD) function is far from simple. This paper proposes a convenient approach to get the fractional option pricing model by changing variables. Further, the option price is transformed as the integral function of the cumulative density function (CDF), so it is not necessary to estimate the distribution function individually by complex approaches. Finally, it encourages to estimate the fractional option pricing model by the way of nonparametric regression and makes empirical analysis with the traded 50 ETF option data in Shanghai Stock Exchange (SSE).

Predicting the stock price of frontier markets using machine learning and modified Black–Scholes Option pricing model

2020 ◽  
Vol 555 ◽  
pp. 124444 ◽  
Author(s):  
Reaz Chowdhury ◽  
M.R.C. Mahdy ◽  
Tanisha Nourin Alam ◽  
Golam Dastegir Al Quaderi ◽  
M. Arifur Rahman
Keyword(s):  
Machine Learning ◽  
Option Pricing ◽  
Stock Price ◽  
Pricing Model ◽  
Black Scholes ◽  
Option Pricing Model

Black-Scholes Option Pricing Model

2012 ◽  
Author(s):  
Svetlozar T. Rachev ◽  
Christian Menn ◽  
Frank J. Fabozzi
Keyword(s):  
Option Pricing ◽  
Pricing Model ◽  
Black Scholes ◽  
Option Pricing Model
Sign in / Sign up

Export Citation Format

Share Document