To hedge its written call, the issuing firm decides to buy shares of the underlying stock or portfolio. The number of shares purchased at time t will depend on the price of the underlying stock at t and on the amount of time remaining until the expiration of the call. Another way of viewing this is that the amount of stock held against the call position depends on the probability that the optio...

While most previous studies have analyzed the performance of Option Strategy Benchmark Index (SBI) in a specific market such as S&P500 and KOSPI200, this study comprehensively investigates option SBIs nine global options markets Europe, Asia, Oceania. In empirical analysis using sample data from September 2008 to April 2019, main results are follows. First, generally provide better than sim...

This thesis consists of two parts. In the first part the Longstaff and Schwartz least squares method (a Monte-Carlo method) for pricing American type options is investigated. The method is based on valuation through a comparison between the value of early exercise and the conditional expected value of continued possession. The result is regressed on a set of basis functions. In this paper the f...

Options or “privileges” as they were known in early 19th Century America actually appeared on the financial scene around the same times as stocks. Initially, there were numerous problems with the trading of options. The terms of the contract were different from contract to contract, contracts had to be exercised in person, and there really was no secondary market to trade. Options were eventual...

The purpose of this paper is to describe the appropriate mathematical framework for the study of the duality principle in option pricing. We consider models where prices evolve as general exponential semimartingales and provide a complete characterization of the dual process under the dual measure. Particular cases of these models are the ones driven by Brownian motions and by Lévy processes, w...

This paper presents a simple reduce-form approach to pricing credit derivatives. The definition of default is purely based on the market value of a risky bond and its potential recovery value. A risky bond is treated as a riskless bond with an embedded short position on a barrier option. The risky bond market implicitly prices this barrier option. The default implied volatility (DIV) curve for ...