Search results for "Option"

Pricing of Forwards and Options in a Multivariate Non-Gaussian Stochastic Volatility Model for Energy Markets

2013

In Benth and Vos (2013) we introduced a multivariate spot price model with stochastic volatility for energy markets which captures characteristic features, such as price spikes, mean reversion, stochastic volatility, and inverse leverage effect as well as dependencies between commodities. In this paper we derive the forward price dynamics based on our multivariate spot price model, providing a very flexible structure for the forward curves, including contango, backwardation, and hump shape. Moreover, a Fourier transform-based method to price options on the forward is described.

EXPERIMENTAL EVALUATION OF THE ACCURACY OF RFID BASED LOCALIZATION SYSTEMS FOR INDUSTRIAL WAREHOUSES

2009

The Best Hedging Strategy in the Presence of Transaction Costs

2009

Considerable theoretical work has been devoted to the problem of option pricing and hedging with transaction costs. A variety of methods have been suggested and are currently being used for dynamic hedging of options in the presence of transaction costs. However, very little was done on the subject of an empirical comparison of different methods for option hedging with transaction costs. In a few existing studies the different methods are compared by studying their empirical performances in hedging only a plain-vanilla short call option. The reader is tempted to assume that the ranking of the different methods for hedging any kind of option remains the same as that for a vanilla call. The …

Option Pricing and Hedging in the Presence of Transaction Costs and Nonlinear Partial Differential Equations

2008

In the presence of transaction costs the perfect option replication is impossible which invalidates the celebrated Black and Scholes (1973) model. In this chapter we consider some approaches to option pricing and hedging in the presence of transaction costs. The distinguishing feature of all these approaches is that the solution for the option price and hedging strategy is given by a nonlinear partial differential equation (PDE). We start with a review of the Leland (1985) approach which yields a nonlinear parabolic PDE for the option price, one of the first such in finance. Since the Leland's approach to option pricing has been criticized on different grounds, we present a justification of…

European Option Pricing with Transaction Costs and Stochastic Volatility: an Asymptotic Analysis

2015

In this paper the valuation problem of a European call option in presence of both stochastic volatility and transaction costs is considered. In the limit of small transaction costs and fast mean reversion, an asymptotic expression for the option price is obtained. While the dominant term in the expansion it is shown to be the classical Black and Scholes solution, the correction terms appear at $O(\varepsilon^{1/2})$ and $O(\varepsilon)$. The optimal hedging strategy is then explicitly obtained for the Scott's model.

Efficient analytic approximation of the optimal hedging strategy for a European call option with transaction costs

2006

One of the most successful approaches to option hedging with transaction costs is the utility-based approach, pioneered by Hodges and Neuberger [Rev. Futures Markets, 1989, 8, 222–239]. Judging against the best possible trade-off between the risk and the costs of a hedging strategy, this approach seems to achieve excellent empirical performance. However, this approach has one major drawback that prevents the broad application of this approach in practice: the lack of a closed-form solution. We overcome this drawback by presenting a simple yet efficient analytic approximation of the solution. We provide an empirical testing of our approximation strategy against the asymptotic and some other …

A cultural comparison study of smartphone adoption in Uzbekistan, South Korea and Turkey

2017

Smartphone popularity is increasing due to the technological advances that mean manufacturers can make more sophisticated devices, and telecommunication companies can provide better connections. Gartner reported that 403 million smartphones were sold in the fourth quarter of 2015, a 9.7% increase over the same period in 2014. It is a common perception that users tend to utilise advanced technology to increase productivity. However, there are studies indicating quite opposite or alternatively slow rates of adoption. To avoid this, companies invest in studying consumer behaviour. The purpose of the study is to examine the effects of drivers and cultural differences on smartphone acceptance in…

Propiedad y riesgo en los inicios de la expansión citrícola valenciana durante el último tercio del siglo XIX

1998

This paper analyses factors linked to the level of economic development that influenced the rate at which part of the Valencian agriculture transformed in line with the incentives generated by the increase in demand. It focuses on the expansion of orange tree operations during the last third of the 19th century where production options are typified according to their economic results, the risk, relationship with the market, and the production resource needs. The impact of these factors depended on the size of the individual`s property. The results thus suggest that smaller landowners preferred crops that were more labour intensive that helped their auto-reproduction whereas the larger ones …

Valuing American Options with Implementation

2017

Master's thesis Business Administration BE501 - University of Agder 2017 This master thesis aims to value American put options by using di erent numerical methods. Three valuation methods for valuing an American put option will be pre- sented and analyzed; the binomial method, the implicit nite di erence method and the least squares Monte Carlo approach (LSM). Due to the opportunity of early exercise of American option contracts, our goal is to nd the optimal exercise strategy which maximizes the payo by using numerical methods. We provide examples of how to implement each algorithm in di erent types of software. A comparison of the methods are given at the end.

A Management Model of ICT Adoption in Latvia

2012

AbstractThis paper describes and analyzes the validity of a managerial model for ICT adoption. The proposed model of ICT adoption decision has two components: an objective component (largely from an economic understanding) and a managerial component (from firm level factors). The factors in both components were considered at firm level. The analysis and confirmation come from a survey of 500 businesses in Latvia in 2008. Confirmation of the theoretical model was accomplished using Ordered Logistical Regression analysis. Analyses results revealed that the dimensions of perceived benefits (top line growth and efficiency gains), technology absorption capacity (employees openness to change, com…