We study the Option pricing with linear investment strategy based on discrete time trading of underlying security, which unlike existing continuous models provides a feasible real market implementation. Closed form formulas for Call and Put price are established fixed interest rates their extensions to stochastic Vasicek Hull-White rates.

The purpose of this paper is to examine whether equity options traded on individual firms are sensitive to the firm’s leverage, and to see if adding leverage to the option model improves its pricing accuracy. In a hitherto unexamined economic approach to option valuation, we use reported leverage from financial statements, and a compound option (CO) model, for valuing stock options on individua...

In this paper, we aim at developing a model for option pricing to reduce the risks associated with Ethiopian commodity prices fluctuations. We used the daily closed Unwashed Lekempti grade 5 (ULK5) coffee and Whitish Wollega Sesame Seed Grade3 (WWSS3) prices obtained from Ethiopia commodity exchange (ECX) market to analyse the prices fluctuations.The natures of log-returns of the prices exhibit a...

A previous paper (West 2005) tackled the issue of calculating accurate uni-, biand trivariate normal probabilities. This has important applications in the pricing of multi-asset options, e.g. rainbow options. In this paper, we derive the Black–Scholes prices of several styles of (multi-asset) rainbow options using change-of-numeraire machinery. Hedging issues and deviations from the Black-Schol...

American options are financial contracts that allow exercise at any time until expiration. While the pricing of standard American option contracts has been well researched, with a few exceptions no analytical solutions exist. Valuation of more involved American option contracts, which include multiple underlying assets or pathdependent payoff, is still to a high degree an uncharted area. Most n...