Two Dimensional Risk Neutral Valuation Relationships For The Pricing Options
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Two Dimensional Risk Neutral Valuation Relationships For The Pricing Of Options
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Author : Guenter Franke
language : en
Publisher:
Release Date : 2004
Two Dimensional Risk Neutral Valuation Relationships For The Pricing Of Options written by Guenter Franke and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with categories.
We generalize the concept of a risk-neutral valuation relationship in order to price options in cases where the restrictive conditions required for a traditional one-dimensional risk-neutral valuation relationship do not apply. We derive conditions under which a two-dimensional risk-neutral valuation relationship exists, relating the price of an option on an asset to the prices of the underlying asset and one other option on the asset. This allows us to price contingent claims in economies where the pricing kernel exhibits non-constant elasticity.
Two Dimensional Risk Neutral Valuation Relationships For The Pricing Options
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Author : Guenter Franke
language : en
Publisher:
Release Date : 2006
Two Dimensional Risk Neutral Valuation Relationships For The Pricing Options written by Guenter Franke and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with categories.
Risk Neutral Valuation
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Author : Nicholas H. Bingham
language : en
Publisher: Springer Science & Business Media
Release Date : 2013-06-29
Risk Neutral Valuation written by Nicholas H. Bingham and has been published by Springer Science & Business Media this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-06-29 with Mathematics categories.
With a simple approach accessible to a wide audience, this book aims for the heart of mathematical finance: the fundamental formula of arbitrage pricing theory. This method of pricing discounts everything and takes expected values under the equivalent martingale measure. The authors approach is simple and excludes unnecessary proofs of measure-theoretic probability, instead, it favors techniques and examples of proven interest to financial practitioners.
Asset Pricing In Discrete Time
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Author : Ser-Huang Poon
language : en
Publisher: OUP Oxford
Release Date : 2005-01-13
Asset Pricing In Discrete Time written by Ser-Huang Poon and has been published by OUP Oxford this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005-01-13 with Business & Economics categories.
Relying on the existence, in a complete market, of a pricing kernel, this book covers the pricing of assets, derivatives, and bonds in a discrete time, complete markets framework. It is primarily aimed at advanced Masters and PhD students in finance. — Covers asset pricing in a single period model, deriving a simple complete market pricing model and using Stein's lemma to derive a version of the Capital Asset Pricing Model. — Looks more deeply into some of the utility determinants of the pricing kernel, investigating in particular the effect of non-marketable background risks on the shape of the pricing kernel. — Derives the prices of European-style contingent claims, in particular call options, in a one-period model; derives the Black-Scholes model assuming a lognormal distribution for the asset and a pricing kernel with constant elasticity, and emphasizes the idea of a risk-neutral valuation relationship between the price of a contingent claim on an asset and the underlying asset price. — Extends the analysis to contingent claims on assets with non-lognormal distributions and considers the pricing of claims when risk-neutral valuation relationships do not exist. — Expands the treatment of asset pricing to a multi-period economy, deriving prices in a rational expectations equilibrium. — Uses the rational expectations framework to analyse the pricing of forward and futures contracts on assets and derivatives. — Analyses the pricing of bonds given stochastic interest rates, and then uses this methodology to model the drift of forward rates, and as a special case the drift of the forward London Interbank Offer Rate in the LIBOR Market Model.
Currency Options And Exchange Rate Economics
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Author : Zhaohui Chen
language : en
Publisher: World Scientific
Release Date : 1998
Currency Options And Exchange Rate Economics written by Zhaohui Chen and has been published by World Scientific this book supported file pdf, txt, epub, kindle and other format this book has been release on 1998 with Business & Economics categories.
This volume is a collection of classical and recent empirical studies of currency options and their implications for issues of exchange rate economics, such as exchange rate risk premium, volatility, market expectations, and credibility of exchange rate regimes. It contains applications on how to extract useful information from option market data for financial forecasting policy purposes. The subjects are discussed in a self-contained, user-friendly format, with introductory chapters on currency option theory and currency option markets. The book can be used as supplementary reading for graduate finance and international economics courses, as training material for central bank and regulatory authorities, or as a reference book for financial analysts.
Exotic Options A Guide To Second Generation Options 2nd Edition
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Author : Peter Guangping Zhang
language : en
Publisher: World Scientific
Release Date : 1998-06-17
Exotic Options A Guide To Second Generation Options 2nd Edition written by Peter Guangping Zhang and has been published by World Scientific this book supported file pdf, txt, epub, kindle and other format this book has been release on 1998-06-17 with Business & Economics categories.
This is the first systematic and extensive book on exotic options. The book covers essentially all popular exotic options currently trading in the Over-the-Counter (OTC) market, from digitals, quantos, spread options, lookback options, Asian options, vanilla barrier options, to various types of exotic barrier options and other options. Each type of exotic options is largely written in a separate chapter, beginning with the basic concepts of the products and then moving on to how to price them in closed-form solutions. Many pricing formulae and analyses which have not previously appeared in the literature are included and illustrated with detailed examples. It will be of great interest to traders, marketers, analysts, risk managers, professors, graduate students, and anyone who is interested in what is going on in the rapidly changing financial market.
Forward Neutral Valuation Relationships For Options On Zero Coupon Bonds
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Author : Antonio Camara
language : en
Publisher:
Release Date : 2008
Forward Neutral Valuation Relationships For Options On Zero Coupon Bonds written by Antonio Camara and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with categories.
This paper extends the literature on Risk-Neutral Valuation Relationships (RNVR's) to derive valuation formulae for options on zero coupon bonds when interest rates are stochastic. We develop Forward-Neutral Valuation Relationships (FNVR's) for the transformed-bounded random walk class. Our transformed-bounded random walk family of forward bond price processes implies that (i) the prices of the zero coupon bonds are bounded below at zero and above at one, and (ii) negative continuously compounded interest rates are ruled out. FNVR's are frameworks for option pricing, where the forward prices of the options are martingales independent of the market prices of risk. We illustrate the generality and flexibility of our approach with models that yield closed-form solutions for call and put options on discount bonds.
Option Implied Risk Neutral Distributions And Risk Aversion
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Author : Jens Carsten Jackwerth
language : en
Publisher:
Release Date : 2008
Option Implied Risk Neutral Distributions And Risk Aversion written by Jens Carsten Jackwerth and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with categories.
Risk Neutral Valuation
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Author : Joseph Tham
language : en
Publisher:
Release Date : 2003
Risk Neutral Valuation written by Joseph Tham and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003 with categories.
Risk-neutral valuation is simple, elegant and central in option pricing theory. However, in teaching risk-neutral valuation, it is not easy to explain the concept of 'risk-neutral' probabilities. Beginners who are new to risk-neutral valuation always have lingering doubts about the validity of the probabilities. What do the probabilities really mean? Are they real or fictional? Where do they come from? What is the relationship between the risk-neutral probabilities and the actual probabilities? Does it mean that all investors are risk-neutral? When is it appropriate to use the risk-free rate as the discount rate?From a pedagogical point of view, in the beginning it is best to avoid the use of probabilities because probabilities can be a barrier to understanding. Instead, it is far preferable to introduce the idea of state prices and then show that the approach with risk-neutral probabilities is equivalent to the use of state prices.In this teaching note, we use simple one-period examples to explain the intuitive ideas behind risk-neutral valuation. It is a gentle introduction to risk-neutral valuation, with a minimum requirement of mathematics and prior knowledge. We will provide the motivation and the rationale for calculating state prices and we will show that the risk-neutral approach is simply another way of looking at the issue of state prices.
A Time Series Approach To Option Pricing
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Author : Christophe Chorro
language : en
Publisher: Springer
Release Date : 2014-12-04
A Time Series Approach To Option Pricing written by Christophe Chorro and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-12-04 with Business & Economics categories.
The current world financial scene indicates at an intertwined and interdependent relationship between financial market activity and economic health. This book explains how the economic messages delivered by the dynamic evolution of financial asset returns are strongly related to option prices. The Black Scholes framework is introduced and by underlining its shortcomings, an alternative approach is presented that has emerged over the past ten years of academic research, an approach that is much more grounded on a realistic statistical analysis of data rather than on ad hoc tractable continuous time option pricing models. The reader then learns what it takes to understand and implement these option pricing models based on time series analysis in a self-contained way. The discussion covers modeling choices available to the quantitative analyst, as well as the tools to decide upon a particular model based on the historical datasets of financial returns. The reader is then guided into numerical deduction of option prices from these models and illustrations with real examples are used to reflect the accuracy of the approach using datasets of options on equity indices.