Optimal Option Portfolio Strategies: Deepening the Puzzle of Index Option Mispricing

Portfolio Optimization under Double Heston Duffie-Kan Model and the Price Calculation of the European Option

In this paper, we present a new version of the Double Heston model, where the mixed Duffie-Kan model is used to predict the volatility of the model instead of the CIR process. According to this model, we predict the stock price and calculate the European option price by using the Monte-Carlo method. Finally, by applying the proposed model, we find the optimal portfolio under the Cardinality Con...

R&d Option Strategies

Combined Pricing and Portfolio Option Procurement

I n this paper, we study a single-product periodic-review inventory system that faces random and price-dependent demand. The firm can purchase the product either from option contracts or from the spot market. Different option contracts are offered by a set of suppliers with a two-part fee structure: a unit reservation cost and a unit exercising cost. The spot market price is random and its real...

Option strategies with linear programming

In practice, all option strategies are decided in advance, given the investor’s belief of the stock price. In this paper, instead of deciding in advance the most appropriate hedging option strategy, an LP problem is formulated, by considering all significant Greek parameters of the Black-Scholes formula, such as delta, gamma, theta, rho and kappa. The optimal strategy to select will be simply d...

The spread option optimal stopping game

We present a solution to an optimal stopping game for geometric Brownian motion with gain functions having the form of payoff functions of spread options. The method of proof is based on reducing the initial problem to a free-boundary problem and solving the latter by means of the smooth-fit principle. The derived result can be interpreted as pricing the (perpetual) spread game option in the Bl...