scholarly journals The Asian Option Pricing when Discrete Dividends Follow a Markov-Modulated Model

2017 ◽  
Vol 07 (06) ◽  
pp. 1067-1080
Author(s):  
Yingyi Fang ◽  
Huisheng Shu ◽  
Xiu Kan ◽  
Xin Zhang ◽  
Zhiwei Zheng
Keyword(s):  
Option Pricing ◽  
Asian Option ◽  
Discrete Dividends ◽  
Markov Modulated

scholarly journals Geometric Average Asian Option Pricing with Paying Dividend Yield under Non-Extensive Statistical Mechanics for Time-Varying Model

Entropy ◽  
2018 ◽  
Vol 20 (11) ◽  
pp. 828 ◽  
Author(s):  
Jixia Wang ◽  
Yameng Zhang
Keyword(s):  
Statistical Mechanics ◽  
Option Pricing ◽  
Asset Price ◽  
Closed Form Solution ◽  
Real Data ◽  
Form Solution ◽  
Asian Option ◽  
Time Varying ◽  
Dividend Yield ◽  
Geometric Average

This paper is dedicated to the study of the geometric average Asian call option pricing under non-extensive statistical mechanics for a time-varying coefficient diffusion model. We employed the non-extensive Tsallis entropy distribution, which can describe the leptokurtosis and fat-tail characteristics of returns, to model the motion of the underlying asset price. Considering that economic variables change over time, we allowed the drift and diffusion terms in our model to be time-varying functions. We used the I t o ^ formula, Feynman–Kac formula, and P a d e ´ ansatz to obtain a closed-form solution of geometric average Asian option pricing with a paying dividend yield for a time-varying model. Moreover, the simulation study shows that the results obtained by our method fit the simulation data better than that of Zhao et al. From the analysis of real data, we identify the best value for q which can fit the real stock data, and the result shows that investors underestimate the risk using the Black–Scholes model compared to our model.

scholarly journals The Greek parameters of a continuous arithmetic Asian option pricing model via Laplace Adomian decomposition method

Open Physics ◽  
2018 ◽  
Vol 16 (1) ◽  
pp. 780-785 ◽  
Author(s):  
Sunday O. Edeki ◽  
Tanki Motsepa ◽  
Chaudry Masood Khalique ◽  
Grace O. Akinlabi
Keyword(s):  
Analytical Solution ◽  
Option Pricing ◽  
Decomposition Method ◽  
Adomian Decomposition Method ◽  
Asian Option ◽  
Pricing Model ◽  
Adomian Decomposition ◽  
Option Pricing Model ◽  
Option Model ◽  
High Level

Abstract The Greek parameters in option pricing are derivatives used in hedging against option risks. In this paper, the Greeks of the continuous arithmetic Asian option pricing model are derived. The derivation is based on the analytical solution of the continuous arithmetic Asian option model obtained via a proposed semi-analytical method referred to as Laplace-Adomian decomposition method (LADM). The LADM gives the solution in explicit form with few iterations. The computational work involved is less. Nonetheless, high level of accuracy is not neglected. The obtained analytical solutions are in good agreement with those of Rogers & Shi (J. of Applied Probability 32: 1995, 1077-1088), and Elshegmani & Ahmad (ScienceAsia, 39S: 2013, 67–69). The proposed method is highly recommended for analytical solution of other forms of Asian option pricing models such as the geometric put and call options, even in their time-fractional forms. The basic Greeks obtained are the Theta, Delta, Speed, and Gamma which will be of great help to financial practitioners and traders in terms of hedging and strategy.

Dividends

2019 ◽  
pp. 219-235
Author(s):  
Tomas Björk
Keyword(s):  
Standard Model ◽  
Option Pricing ◽  
Dividend Yield ◽  
Short Discussion ◽  
Discrete Dividends

We extend the previously derived theory to include the case when the underlying assets are paying dividends. After a short discussion of discrete dividends we mainly study the case of continuous dividends. The theory is derived by reducing the dividend-paying model to an equivalent standard model with no dividends. For the case of a constant dividend yield we derive explicit option pricing formulas.

Sign in / Sign up

Export Citation Format

Share Document