We measure asset price jumps by the hedging error they induce on a delta-hedged position of European options. Based on high frequency data, we propose a nonparametric estimator for this measure and a test for its positivity. We further construct a Kolmogorov-type test for the presence of jump hedging errors for a possibly infinite-dimensional family of options based on the worst-case contract i...

A semi-static replication method is introduced for pricing discretely sampled path-dependent options. It depends upon buying and selling options at the reset times of the option but does not involve trading at intervening times. The method is model independent in that it only depends upon the existence of a pricing function for vanilla call options which depends purely on current time, time to ...

If returns on two assets share common volatility components, the prices of options on the assets should be interdependent and the implied volatility spread should mean revert. We first demonstrate, using the canonical correlation method, that there is a common component among the volatilities of the returns on S&P 100 and S&P 500 indexes. We then exploit this commonality by trading on the volat...

This paper describes a practical simulation-based algorithm, which we call the Stochastic Grid Bundling Method (SGBM) for pricing multidimensional Bermudan (i.e. discretely exercisable) options. The method generates a direct estimator of the option price, an optimal early-exercise policy as well as a lower bound value for the option price. An advantage of SGBM is that the method can be used for...

(a) The observed bidding patterns depend on the type of asset under evaluation. In particular, subject behavior when buying or selling a basic lottery seems much more cautious than their behavior when buying or selling options on that lottery. (b) The observed bidding patterns also depend on subject positions with respect to the underlying asset. In particular, the bids for buying lotteries and...

Options with discontinuous payoffs are generally traded above their theoretical Black–Scholes prices because of the hedging difficulties created by their large delta and gamma values. A theoretical method for pricing these options is to constrain the hedging portfolio and incorporate this constraint into the pricing by computing the smallest initial capital which permits superreplication of the...

In this paper we provide a closed-form approximation as well as a measure of the error for the price of several twodimensional derivatives under the assumptions of stochastic correlation and constant volatility. The method is applied to the pricing of Spread Options and Quantos Options, while three models for the stochatsic correlation are considered.

This specification defines conferencing call control features for the Session Initiation Protocol (SIP). This document builds on the Conferencing Requirements and Framework documents to define how a tightly coupled SIP conference works. The approach is explored from the perspective of different user agent (UA) types: conferenceunaware, conference-aware, and focus UAs. The use of Uniform Resourc...

The theory of modular binomial lattices enables the simultaneous combinatorial analysis of finite sets, vector spaces, and chains. Within this theory three generalizations of Stifling numbers of the second kind, and of Lah numbers, are developed. 1. Stirling numbers and their formal generalizations The nota t ional convent ions of this paper are as follows: N = {0,1,2 . . . . }, P = {1,2,. . . ...