The difficult problem of the characterization of arbitrage free dynamic stochastic models for the equity markets was recently given a new life by the introduction of market models based on the dynamics of the local volatility. Typically, market models are based on Itô stochastic differential equations modeling the dynamics of a set of basic instruments including, but not limited to, the option ...

The difficult problem of the characterization of arbitrage free dynamic stochastic models for the equity markets was recently given a new life by the introduction of market models based on the dynamics of the local volatility. Typically, market models are based on Itô stochastic differential equations modeling the dynamics of a set of basic instruments including, but not limited to, the option ...

Switching costs are prevalent in network industries, and this paper investigates their effects on market outcome. I find that the role of switching costs depends on network effects and the outside option. Without a viable outside option, high switching costs can neutralize the tendency towards market dominance associated with network effects, but with a viable outside option, switching costs fa...

This study investigates the algorithm of effective option trading strategy based on the superior volatility forecasts using actual option price data in Taiwan stock market. Forecast evaluation supports the significant incremental explanatory power of investor sentiments on the fitting and forecasting of future volatility to its adversarial multiple-factor model, especially the market turnover a...

Ranking is a technique to categorize & finding the best option in the market. When number of best option is available in the market so its difficult to getting the best option is always a problem. In this paper we proposed a technique to optimize the ranking and its availability to check performance factor in order to maintained high ranking and quality of popular option in the market. We enhan...

Most firms face some form of competition in product markets. The degree of competition a firm faces feeds back into its cash flows and affects the values of the securities it issues. We demonstrate that, through its effects on stock prices, product market competition affects the prices of options on equity naturally and leads to an inverse relationship between equity returns and volatility, gen...

Option types are a powerful abstraction that allows the concise modelling of combinatorial problems where some decisions are relevant only if other decisions are made. They have a wide variety of uses: for example in modelling optional tasks in scheduling, or exceptions to a usual rule. Option types represent objects which may or may not exist in the constraint problem being modelled, and can t...

Currency option market has developed strongly since breakdown of the Bretton Wood agreement in the early 1970s. Options have begun to be an alternative risk management tool to cope with the high exchange rate volatility. After the stock market crash in 1987 market participants could have observed some new phenomena in option prices. The so-called volatility smile appeared to violate the famous ...

Estimation of a consistent volatility model of the underlying is crucial for option hedging. The authors illustrate that, compared to the implied/constant volatility method, a local volatility function method can estimate the underlying volatility from option prices more consistently. The result is more accurate hedge parameters and smaller hedging errors. The evidence provided includes an exam...