Why would you buy an electric car on Jetski Friday? Or, a critique of financial markets from an options trading room

This article presents a close, dialogue-based ethnographic account of a group of contemporary options market makers making a decision about pricing options in Tesla, Inc. Careful attention to their deliberations reveals how the rise of algorithms and automation on financial markets have rendered traders alienated and estranged from the markets they work on for their livelihood. This alienation arises, in part, due to novel cascade effects between futures and underlying equities, which algorithmic and automated trading seems to afford, and which also relate to news events as well as the actions of politicians and prominent business people. Emerging from this alienation, traders produce a critique of how highly automated financial markets allocate capital and how ripe they are for political manipulation.

A Fitted L-Multi-Point Flux Approximation Method for Pricing Options

In this paper, we introduce a special kind of finite volume method called Multi-Point Flux Approximation method (MPFA) to price European and American options in two dimensional domain. We focus on the L-MPFA method for space discretization of the diffusion term of Black–Scholes operator. The degeneracy of the Black-Scholes operator is tackled using the fitted finite volume method. This combination of fitted finite volume method and L-MPFA method coupled to upwind methods gives us a novel scheme, called the fitted L-MPFA method. Numerical experiments show the accuracy of the novel fitted L-MPFA method comparing to well known schemes for pricing options.

Management of Energy Costs of Industrial Enterprises Connected to Electric Grid of Electric Power Producers

Industrial enterprises connected to the power grids of electricity producers spend a lot of money on the transport of purchased electrical energy. The present article introduces some opportunities to minimize the costs. The author studied the principles of pricing of the transport of electrical energy purchased by industrial enterprises connected to power grids of electricity producers and described the advantages and disadvantages of the existing pricing options. The new indicator generator of voltage tariff coefficient made it possible to analyze the effectiveness of the transport tariffs for electrical energy at various types of industrial enterprises in relation to the tariff field of several regions of Russia. The study revealed ineffectiveness of the current tariffs on the transport of purchased electrical energy applied by such industrial enterprises. The author developed recommendations to reduce the cost of electricity. The main priority option was the application of demand management for electricity consumption by regulating the schedules of energy-intensive technological processes. This measure takes into account the criteria of economic efficiency, system reliability, and sustainability. It will enable industrial enterprises to manage their own schedule of electricity consumption without having to change the planned production volumes, thus reducing all cost components.

A Comparative Study of Pricing Option with Efficient Methods

Our main objective of this paper is to introduce four individual techniques of pricing options; the techniques are Binomial method, Trinomial method, Monte Carlo simulation and Black-Scholes-Merton model. Because they play a significant role in option valuation of stock price dynamics, risk managements as well as stock market. In this paper, we briefly discuss all these four methods with their properties and behavior. We also focused on numerical technique for the higher accuracy of option pricing and compare them graphically. We use the Computer Algebra System (CAS) Python (Edition 2019.3.1) for this purpose. GUB JOURNAL OF SCIENCE AND ENGINEERING, Vol 7, Dec 2020 P 1-7

Hedging options with an illiquid underlying and non-probabilistic option pricing in practice

We compare three different dynamic hedging strategies for the purchase or sale of a bundle of European options to profit from volatility arbitrage. The investor will "cross hedge" with a stock highly correlated with the untraded underlying. The first strategy maximizes terminal utility, the second minimizes the variance of the incremental profit, and the third is the adjusted Black-Scholes strategy. We note that the nature of cross hedging results in significant potential for losses. We study the robustness of the strategies to misspecification of parameters by the investor and find that the first two strategies are more robust to parameter misspecification. On a different subject, we then attempt to find profit opportunities by pricing options using a simple non-probabilistic model. We find a situation where an investor willing to take risks can profit, but a more cautious investor cannot. We also derive basic non-probabilistic volatility arbitrage results.

Hedging options with an illiquid underlying and non-probabilistic option pricing in practice

We compare three different dynamic hedging strategies for the purchase or sale of a bundle of European options to profit from volatility arbitrage. The investor will "cross hedge" with a stock highly correlated with the untraded underlying. The first strategy maximizes terminal utility, the second minimizes the variance of the incremental profit, and the third is the adjusted Black-Scholes strategy. We note that the nature of cross hedging results in significant potential for losses. We study the robustness of the strategies to misspecification of parameters by the investor and find that the first two strategies are more robust to parameter misspecification. On a different subject, we then attempt to find profit opportunities by pricing options using a simple non-probabilistic model. We find a situation where an investor willing to take risks can profit, but a more cautious investor cannot. We also derive basic non-probabilistic volatility arbitrage results.

Residue Sum Formula for Pricing Options under the Variance Gamma Model

We present and prove a triple sum series formula for the European call option price in a market model where the underlying asset price is driven by a Variance Gamma process. In order to obtain this formula, we present some concepts and properties of multidimensional complex analysis, with particular emphasis on the multidimensional Jordan Lemma and the application of residue calculus to a Mellin–Barnes integral representation in C3, for the call option price. Moreover, we derive triple sum series formulas for some of the Greeks associated to the call option and we discuss the numerical accuracy and convergence of the main pricing formula.

PRICING OPTIONS UNDER STOCHASTIC INTEREST RATE AND THE FRASCA–FARINA PROCESS: A SIMPLE, EXPLICIT FORMULA

Assuming a stochastic interest rate, we introduce a simple formula for pricing European options. In doing so, we provide a complete closed-form formula that does not require any numerical/computational methods. Furthermore, the model and formula are far simpler than the previous models/formulas. Our formula is as simple as the classical Black–Scholes pricing formula. Moreover, it removes the theoretical limitation of the original Black–Scholes model without any added practical complexity.