A barrier option is an otherwise vanilla call or put option with a strike of X but with an extra parameter B, the barrier: the option only comes into existence (is knocked in) or is terminated (is knocked out) if the spot price crosses the barrier during the life of the option. Because there is a positive probability (in either case) of worthlessness, these options are cheaper than the correspo...

We performed a comprehensive analysis on the price bounds of CDO tranche options, and illustrated that the CDO tranche option prices can be effectively bounded by the joint distribution of default time (JDDT ) from a default time copula. Systemic and idiosyncratic factors beyond the JDDT only contribute a limited amount of pricing uncertainty. The price bounds of tranche option derived from a d...

In this paper we propose a general foreign equity option pricing framework that unifies the vast foreign equity option pricing literature and incorporates the stochastic volatility into foreign equity option pricing. Under our framework, the time-changed Lévy processes are used to model the underlying assets price of foreign equity option and the closed form pricing formula is obtained through ...

In a choice between two options, decision makers can often be roughly divided into three groups: those who strongly prefer the first option, those who strongly prefer the second option, and those whose choices are most sensitive to the specific conditions (Switchers). In any reference state, such as the experimental control, Switchers choices are unlikely to be exactly equally divided between t...

This paper revisits Williams (1997) on the effect of net rental price, asset quality and variable investment costs on the asset redevelopment decision. This paper develops a quasi-analytical method for solving the generalised real renovation option problem by treating the investment cost as having both a variable and a fixed element and then extends the analysis for the case where both the net ...

Abstract The expOU stochastic volatility model is capable of reproducing fairly well most important statistical properties of financial markets daily data. Among them, the presence of multiple time scales in the volatility autocorrelation is perhaps the most relevant which makes appear fat tails in the return distributions. This paper wants to go further on with the expOU model we have studied ...

Drawing from ideas of collusion in option games model with Cournot competition and price competition in a differentiated duopoly, we model, in a binomial framework, the latent collusion opportunity open to a first-follower. The first-follower is faced with investment decision in production capacity under market uncertainty as well as competitive uncertainty. The firstfollower has an opportunity...

We propose an algorithm to calculate confidence intervals for the values of hedging parameters of discretely exercisable options using Monte-Carlo simulation. The algorithm is based on a combination of the duality formulation of the optimal stopping problem for pricing discretely exercisable options and Monte-Carlo estimation of hedging parameters for European options. We show that the width of...