Dynamic Robust Pricing Model of European Call Option under the Fractional Market with Knightian Uncertainty

2011 ◽  
Vol 271-273 ◽  
pp. 675-678
Author(s):  
Hui Zhang ◽  
Wen Yu Meng
Keyword(s):  
Financial Market ◽  
Conditional Expectation ◽  
Explicit Solution ◽  
Knightian Uncertainty ◽  
Call Option ◽  
Pricing Model ◽  
European Call Option

The fractional financial market with Knightian uncertainty is studied. Using the important theories of the quasi conditional expectation and the quasi martingale, we establish the dynamic robust pricing model of European call option and get the explicit solution of the model.

Dynamic Robust Pricing Model of European Call Option and Empirical Research in Fractional Market

2011 ◽  
Vol 368-373 ◽  
pp. 3226-3229
Author(s):  
Hui Zhang ◽  
Wen Yu Meng
Keyword(s):  
Empirical Research ◽  
Financial Market ◽  
Conditional Expectation ◽  
Explicit Solution ◽  
Knightian Uncertainty ◽  
Call Option ◽  
Pricing Model ◽  
European Call Option

The fractional financial market with Knightian uncertainty is studied. We get the dynamic robust pricing model of European call option. Using the important theories of the quasi conditional expectation and the quasi martingale, we get the explicit solution of the model. By making empirical research on the financial product of Chinese bank ahead 09004, we depict the important impacts of the Knightian uncertainty on the robust pricing of European call option.

scholarly journals It Takes Two to Tango: Estimation of the Zero-Risk Premium Strike of a Call Option via Joint Physical and Pricing Density Modeling

Risks ◽  
2021 ◽  
Vol 9 (11) ◽  
pp. 196
Author(s):  
Stephan Höcht ◽  
Dilip B. Madan ◽  
Wim Schoutens ◽  
Eva Verschueren
Keyword(s):  
Risk Premium ◽  
Pricing Strategy ◽  
Call Option ◽  
Option Prices ◽  
Pricing Model ◽  
Stable Pattern ◽  
European Call Option ◽  
Pricing Measure ◽  
The Stability ◽  
Density Modeling

It is generally said that out-of-the-money call options are expensive and one can ask the question from which moneyness level this is the case. Expensive actually means that the price one pays for the option is more than the discounted average payoff one receives. If so, the option bears a negative risk premium. The objective of this paper is to investigate the zero-risk premium moneyness level of a European call option, i.e., the strike where expectations on the option’s payoff in both the P- and Q-world are equal. To fully exploit the insights of the option market we deploy the Tilted Bilateral Gamma pricing model to jointly estimate the physical and pricing measure from option prices. We illustrate the proposed pricing strategy on the option surface of stock indices, assessing the stability and position of the zero-risk premium strike of a European call option. With small fluctuations around a slightly in-the-money level, on average, the zero-risk premium strike appears to follow a rather stable pattern over time.

scholarly journals EUROPEAN CALL OPTION APPLICATION IN INCOMPLETE MARKET-ANALYSIS AND DEVELOPMENT

2014 ◽  
Vol 10 (1) ◽  
pp. 157-168
Author(s):  
Ro’fah Nur Rachmawati ◽  
Sufon ◽  
Widodo Budiharto
Keyword(s):  
Incomplete Market ◽  
Market Analysis ◽  
Call Option ◽  
European Call Option
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