Pricing and Hedging of swing options in the European electricity and
... Due to the underlying supply and demand structure of natural gas and electricity consumer and producers are faced with volumetric risk in their undertakings. The stochastic nature of the demand structure in both natural gas and electricity means that agents want to have optionality in their volumes. ...
... Due to the underlying supply and demand structure of natural gas and electricity consumer and producers are faced with volumetric risk in their undertakings. The stochastic nature of the demand structure in both natural gas and electricity means that agents want to have optionality in their volumes. ...
A Copula-based Approach to Option Pricing and Risk Assessment
... structure can be flexible, including linear, nonlinear, or only tail dependent. The marginal distributions can be easily dealt with using the univariate volatility models available in the literature. ...
... structure can be flexible, including linear, nonlinear, or only tail dependent. The marginal distributions can be easily dealt with using the univariate volatility models available in the literature. ...
A Two-Asset Jump Diffusion Model with Correlation
... derivation is that trading takes place continuously in time and that the stock price has a continuous sample path with probability one. Realistically, continuous trading is not possible, however rendering the BlackScholes model invalid because of this would be an over-reaction as the continuous trad ...
... derivation is that trading takes place continuously in time and that the stock price has a continuous sample path with probability one. Realistically, continuous trading is not possible, however rendering the BlackScholes model invalid because of this would be an over-reaction as the continuous trad ...
Day Effects in Korean Stock Market
... Possible Sources of the Maturity Effects Most studies argue that the primary source of expiration day effects stems from the cash settlement feature of index derivative contracts. Index arbitrage represents a trading activity that exploits price differences between a derivative asset and its underly ...
... Possible Sources of the Maturity Effects Most studies argue that the primary source of expiration day effects stems from the cash settlement feature of index derivative contracts. Index arbitrage represents a trading activity that exploits price differences between a derivative asset and its underly ...
Term Structure Lattice Models
... Note that Equation (4) can now be used to solve iteratively for the ai ’s as follows: • Set i = 1 in (4) and note that Pe (0, 0) = 1 to see that a0 = s1 . • Now use the forward equations to find Pe (1, 0) and Pe (1, 1). • Now set i = 2 in (4) and solve for a1 . • Continue to iterate forward until al ...
... Note that Equation (4) can now be used to solve iteratively for the ai ’s as follows: • Set i = 1 in (4) and note that Pe (0, 0) = 1 to see that a0 = s1 . • Now use the forward equations to find Pe (1, 0) and Pe (1, 1). • Now set i = 2 in (4) and solve for a1 . • Continue to iterate forward until al ...
Demand-Based Option Pricing - Faculty Directory | Berkeley-Haas
... One of the major achievements of financial economics is the no-arbitrage theory that determines derivative prices independently of investor demand. Building on the seminal contributions of Black and Scholes (1973) and Merton (1973), a large literature develops various parametric implementations of ...
... One of the major achievements of financial economics is the no-arbitrage theory that determines derivative prices independently of investor demand. Building on the seminal contributions of Black and Scholes (1973) and Merton (1973), a large literature develops various parametric implementations of ...
Options-Implied Probability Density Functions for Real Interest Rates
... is the task undertaken in the present paper. A pdf for real interest rates cannot be backed out from pdfs from nominal interest rates and inflation without making an assumption about the correlation between these two. However, over the last seven years, the Chicago Board Options Exchange (CBOE) has ...
... is the task undertaken in the present paper. A pdf for real interest rates cannot be backed out from pdfs from nominal interest rates and inflation without making an assumption about the correlation between these two. However, over the last seven years, the Chicago Board Options Exchange (CBOE) has ...
Risk-neutral Density Extraction from Option Prices
... represents a powerful approach since the expectations of market participants about future developments are extracted and modeled, which is essential in many contexts. For instance, it is possible to analyze the deviations of the extracted risk-neutral density from the log-normal density of the Black ...
... represents a powerful approach since the expectations of market participants about future developments are extracted and modeled, which is essential in many contexts. For instance, it is possible to analyze the deviations of the extracted risk-neutral density from the log-normal density of the Black ...
06effectiveness
... American option, but in an efficient market the current price of an American option will not sell below its risk free present value. ...
... American option, but in an efficient market the current price of an American option will not sell below its risk free present value. ...
Chapter 15
... D. All prices are subject to daily move limits. See Table 15-4 on page 400. 1. When limits are reached, trading is stopped. 2. It is possible in volatile markets that it may take more than one day to offset a losing position. ...
... D. All prices are subject to daily move limits. See Table 15-4 on page 400. 1. When limits are reached, trading is stopped. 2. It is possible in volatile markets that it may take more than one day to offset a losing position. ...
full text
... situation, there has not been much research on testing this important property since the study of Strong and Xu (1999). In addition, the data used in the previous studies are quite outdated as they are all up to the year of 1994 though the global financial markets and the nature of their microstruct ...
... situation, there has not been much research on testing this important property since the study of Strong and Xu (1999). In addition, the data used in the previous studies are quite outdated as they are all up to the year of 1994 though the global financial markets and the nature of their microstruct ...
Energy Derivatives
... the purchase price of December natural gas or execute a LONG HEDGE. Note: 10,000 MMBTU = 1 NYMEX contract for natural gas 300,000 MMBTU = 30 contracts ...
... the purchase price of December natural gas or execute a LONG HEDGE. Note: 10,000 MMBTU = 1 NYMEX contract for natural gas 300,000 MMBTU = 30 contracts ...
Perspective article: “Why the use of options as hedging instruments
... The use of options as hedging products under AASB 139 is not a viable option because, even if hedge accounting is achieved, it still leaves the entity exposed to profit and loss volatility from movements in the time value associated with the option. AASB 9 introduces new rules that make it more attr ...
... The use of options as hedging products under AASB 139 is not a viable option because, even if hedge accounting is achieved, it still leaves the entity exposed to profit and loss volatility from movements in the time value associated with the option. AASB 9 introduces new rules that make it more attr ...
NBER WORKING PAPER SERIES PANELS Torben G. Andersen
... trading of derivative contracts has grown explosively, in part reflecting a desire among investors to actively manage volatility and jump risk exposures. As a result, ever more comprehensive price data for, in particular, exchange-traded options have become available over time.1 These options span a ...
... trading of derivative contracts has grown explosively, in part reflecting a desire among investors to actively manage volatility and jump risk exposures. As a result, ever more comprehensive price data for, in particular, exchange-traded options have become available over time.1 These options span a ...
On Fourier cosine expansions and the put
... Numerical integration methods are traditionally very efficient for the valuation of single asset European options. They are also referred to as “transform methods” as a transformation, for example to the Fourier domain, is often combined with numerical integration [8, 13, 20]. The transform methods ...
... Numerical integration methods are traditionally very efficient for the valuation of single asset European options. They are also referred to as “transform methods” as a transformation, for example to the Fourier domain, is often combined with numerical integration [8, 13, 20]. The transform methods ...
1) If a bank manager chooses to hedge his portfolio of treasury
... Parties who have bought a futures contract and thereby agreed to _____ (take delivery of) the bonds are said to have taken a ____ position. sell; short buy; short sell; long buy; long Question Status: Previous Edition Parties who have sold a futures contract and thereby agreed to _____ (deliver) the ...
... Parties who have bought a futures contract and thereby agreed to _____ (take delivery of) the bonds are said to have taken a ____ position. sell; short buy; short sell; long buy; long Question Status: Previous Edition Parties who have sold a futures contract and thereby agreed to _____ (deliver) the ...
I 1
... 2. Price-compensating variation in income Price-compensating variation in income measures the compensation needed due to an increase in price To understand the price-compensating variation in income we first introduce the expenditure ...
... 2. Price-compensating variation in income Price-compensating variation in income measures the compensation needed due to an increase in price To understand the price-compensating variation in income we first introduce the expenditure ...
CHAPTER 13 Options on Futures
... Contract Months: Thirty consecutive months plus long-dated futures initially listed 36, 48, 60, 72, and 84 months prior to delivery. Expiration and final Settlement: Last trading day is three business days prior to the last trading day for the underlying futures contract. Trading Hours: Open outcry ...
... Contract Months: Thirty consecutive months plus long-dated futures initially listed 36, 48, 60, 72, and 84 months prior to delivery. Expiration and final Settlement: Last trading day is three business days prior to the last trading day for the underlying futures contract. Trading Hours: Open outcry ...
Stock option contract adjustments The case of special dividends
... the exercise price of the option is reduced by the amount of the dividend on the ex-dividend day. In Europe and Australia, on the other hand, the exercise price is reduced and the number of deliverable shares is increased proportionally by the ratio of the dividend relative to the cum-dividend stock ...
... the exercise price of the option is reduced by the amount of the dividend on the ex-dividend day. In Europe and Australia, on the other hand, the exercise price is reduced and the number of deliverable shares is increased proportionally by the ratio of the dividend relative to the cum-dividend stock ...
3 Comparison of installment option and vanilla option
... normal option with no special or unusual features, while installment options are option for which the underlying is another option. Therefore, there are two strike prices and two exercise dates. Also installment type of option usually exists for currency or fixed-income markets, where an uncertainty ...
... normal option with no special or unusual features, while installment options are option for which the underlying is another option. Therefore, there are two strike prices and two exercise dates. Also installment type of option usually exists for currency or fixed-income markets, where an uncertainty ...
Optimal Option Portfolio Strategies: Deepening the Puzzle of Index
... short-selling so that only one of the two, long or short positions, is ever taken. We study the performance of the OOPS in an out-of-sample exercise using a conservative CRRA utility function. Between January 1996 and August 2013, the OOPS yields an annualized certainty equivalent of 9.94% and an a ...
... short-selling so that only one of the two, long or short positions, is ever taken. We study the performance of the OOPS in an out-of-sample exercise using a conservative CRRA utility function. Between January 1996 and August 2013, the OOPS yields an annualized certainty equivalent of 9.94% and an a ...