Option Contract Pricing Model for Real Option with Right to Sell/Purchase the Project

Real Option Pricing with Mean-Reverting Investment and Project Value

Here, the expected value is taken under an appropriate risk-adjusted measure. Furthermore, VT and IT represent the project’s value and amount to be invested, respectively, at time T . If the project can be started at anytime, then (1.1) is modified to its American counterpart. In this case, the maturity date T is replaced by a stopping time τ (0 ≤ τ ≤ T ) and the investor chooses the stopping t...

A New Stock Model for Option Pricing in Uncertain Environment

The option-pricing problem is always an important part in modern finance. Assuming that the stock diffusion is a constant, some literature has introduced many stock models and given corresponding option pricing formulas within the framework of the uncertainty theory. In this paper, we propose a new stock model with uncertain stock diffusion for uncertain markets. Some option pricing formulas on...

BENCHOP - The BENCHmarking project in option pricing

The Binomial Option Pricing Model

The simplest model for pricing d erivative securities is the binomial model. It generalizes the o n e period \up-down" model of Chapte r 1 t o a m ulti-period setting, assuming t hat t he price of the u nderlying asset follows a random walk. In the binomial model, there are N trading periods and N+1 trading d ates, t 0 t 1 ::: t N when it is possible to i n vest in a risky security with p r i c...

Numerical algorithm for discrete barrier option pricing in a Black-Scholes model with stationary process

In this article, we propose a numerical algorithm for computing price of discrete single and double barrier option under the emph{Black-Scholes} model. In virtue of some general transformations, the partial differential equations of option pricing in different monitoring dates are converted into simple diffusion equations. The present method is fast compared to alterna...