Digital diversification increasingly occurs not through acquisition or formal alliance but through staged, option-like commitments between large technology firms and frontier artificial intelligence (AI) developers. This paper uses the Amazon–O...
Optionality is an issue within the minimalist theory of language, in which the principle of the “last resort” does not admit competing options to express the same meaning. What is needed is a solid empirical base showing that apparently c...
In this article, the multitouch option, also called the
This paper investigates the relationship between option trading behavior and option pricing patterns. We argue that greater active trading in the options market due to investor overconfidence leads to higher volatility and larger discrepancies in opt...
This article provides exact analytical formulae for various kinds of rainbow step barrier options. These are highly flexible and sophisticated multi-asset barrier options based on the following principle: the option life is divided into several time...
We develop a practical framework for identifying and quantifying the hidden layers of risks and optionality embedded in American options by introducing stochasticity into one or more of their underlying determinants. The heuristic approach remedies t...
In this research, we summarize the results of implementing the market risk premium into the option valuation formulas of the Black–Scholes–Merton model for out-of-the-money (OTM) options. We show that derivative prices can partly depend o...
The exotic options with curved nonlinear payoffs have been traded in financial markets, which offer great flexibility to participants in the market. Among them, power options with the payoff depending on a certain power of the underlying asset price...
This paper demonstrates that perfectly calibrating a multi-asset model to observed market prices of all basket call options is insufficient to uniquely determine the price of a best-of call option. Previous research on multi-asset option pricing has...
This paper looks at adapting a recent approach found in the literature for pricing short-term American options to price American straddle options with two free boundaries. We provide a series solution in which explicit formulas for the coefficients a...
In this paper, we present a fast and accurate numerical approach applied to specific American-style derivatives, namely American power call and put options, whose main feature is that the underlying asset is raised to a power. The study is set in the...
This paper derives accurate and efficient analytic approximations for the prices of both European and American continuous-installment call and put options. The solutions are in the form of series in time-to-expiry with explicit formulae for the coeff...
The portfolio optimization problem generally refers to creating an investment portfolio or asset allocation that achieves an optimal balance of expected risk and return. These portfolio returns are traditionally assumed to be continuous random variab...
This paper proposes a non-parametric technique of option valuation and hedging. Here, we replicate the extended Black–Scholes pricing model for the exotic barrier options and their corresponding Greeks using the fully connected feed-forward neu...
Oil producers are going through a hard period. They have a number of real options at their disposal. This paper addresses the valuation of two of them: the option to delay investment and the option to abandon a producing field. A prerequisite for thi...
American options have long received considerable attention in the literature, with numerous publications dedicated to their pricing. Bermudan and randomized Bermudan options are broadly used to estimate their prices efficiently. Notably, the penalty...
This study examines the efficiency of weekly option prices around firms’ earnings announcements. With most of the largest firms now having options that expire on a weekly basis, option traders can hedge or speculate on earnings news using optio...
In this paper, we extend the SABO technique (Semi-Analytical method for Barrier Options), based on collocation Boundary Element Method (BEM), to the pricing of Barrier Options with payoff dependent on more than one asset. The efficiency and accuracy...
This study explored the option value embedded in a reverse mortgage in Korea through an empirical analysis, using the Black–Scholes option-pricing model. The value of a reverse mortgage is affected by the variation in house prices. However, old...
In this paper, we study a simplified approach to determine the pricing formula for vulnerable options involving two correlated underlying assets. We utilize an intensity-based model to describe the credit risk associated with these vulnerable options...
In this third and final paper of our series on the topic of portfolio optimization, we introduce a further generalized portfolio selection method called generalized entropic portfolio optimization (GEPO). GEPO extends discrete entropic portfolio opti...
Classic options can no longer meet the diversified needs of investors; thus, it is of great significance to construct and price new options for enriching the financial market. This paper proposes a new option pricing model that integrates the logarit...
Finite difference methods are commonly used in the pricing of discretely monitored exotic options in the Black–Scholes framework, but they tend to converge slowly due to discontinuities contained in terminal conditions. We present an effective...
In this paper, we study perpetual American put options with a generalized standard put payoff and establish sufficient conditions for the existence and uniqueness of the solution to the associated pricing problem. As a key tool, we express the Black&...
In this short paper, we study the asymptotics for the price of call options for very large strikes and put options for very small strikes. The stock price is assumed to follow the Black–Scholes models. We analyze European, Asian, American, Parisian a...
This paper develops the interval maximum entropy model for the interval European option valuation by estimating an underlying asset distribution. The refined solution for the model is obtained by the Lagrange multiplier. The particle swarm optimizati...
Empirical evidence indicates that asset returns adhere to an extended normal distribution characterized by excessive kurtosis and non-zero skewness. Consequently, option prices derived from this distribution diverge from those predicted by the Black&...
In this work, we adapt a Monte Carlo algorithm introduced by Broadie and Glasserman in 1997 to price a
A rapid transition toward a decarbonized economy is underway, following the Paris Agreement and the International Maritime Organization 2030 decarbonization goals. However, due to the high cost of the rapid transition to eco-friendly energy and the g...
Slightly over fifty years ago, the Black–Scholes option pricing model revolutionized investing by enabling a shift from linear to non-linear payoff structures. Myron Scholes later published two papers documenting the performance of passive opti...
Most of the models leading to an analytical expression for option prices are based on the assumption that underlying asset returns evolve according to a Brownian motion with drift. For some asset classes like commodities, a Brownian model does not fi...
Scholars propose that future research on real options theory should shift attention away from option buying during the first investment stage and toward option execution after investment. Researchers maintain that it would be interesting to explore t...
This study develops a quasi-closed-form solution for the valuation of an American put option and the critical price of the underlying asset. This is an important area of research both because of a large number of transactions for American put options...
Since the early 21st century, within fuzzy mathematics, there has been a stream of research in the field of option pricing that introduces vagueness in the parameters governing the movement of the underlying asset price through fuzzy numbers (FNs). T...
The article continues the study of the market model based on jump-telegraph processes. It is assumed that the price of a risky asset follows the stochastic exponential of a piecewise linear process, equipped with jumps that occur at the moments of a...
This work aims to develop a measure of how much credit risk is priced into equity options. Such a measure appears particularly appealing when applied to a portfolio of equity options, as it allows for the factoring in of firm-specific default dynamic...
This paper proposes an option pricing model under a discrete investment strategy. From the perspective of investors’ initiative, we assume that the investor can take early actions before the underlying asset price reaches the strike level and t...
We present an empirical study of the Bachelier implied volatility smile for spread options on crude oil futures. It is known that the at-the-money (ATM) spread implied volatility is simply related to the futures prices and volatilities and their corr...
Reinforcement learning has been applied to various types of financial assets trading, such as stocks, futures, and cryptocurrencies. Options, as a novel kind of derivative, have their characteristics. Because there are too many option contracts for o...
In this paper, we consider the problem of pricing a spread option when the underlying assets follow a bivariate regime-switching jump diffusion model. We exploit an approximation technique which is based on the univariate Fourier transform representa...
In this paper, the performance of artificial neural networks in option pricing was analyzed and compared with the results obtained from the Black–Scholes–Merton model, based on the historical volatility. The results were compared based on...
This study examines whether Chief Executive Officers (CEOs) exercise a greater proportion of their exercisable options in response to firm-specific stock price bubbles. For a sample of U.S. firms from 1992 to 2021, the study identifies stock price bu...
Blockchain technology has demonstrated huge potential in providing simplicity and efficiency for different industries. However, its implementation in the automotive and aerospace industry is quite slow because of its difficulty to show value creation...
In this paper, the valuation of the exchange option with credit risk under a hybrid credit risk model is investigated. In order to build the hybrid model, we consider both the reduced-form model and the structural model. We adopt the probabilistic ap...
In this paper we introduce a deep learning method for pricing and hedging American-style options. It first computes a candidate optimal stopping policy. From there it derives a lower bound for the price. Then it calculates an upper bound, a point est...
This article exploits arbitrage valuation bounds on currency basket options. Instead of using a sophisticated model to price these options, we consider a set of pricing models that are consistent with the prices of available hedging assets. In the ab...
In option pricing, we often deal with options whose payoffs depend on multiple factors such as foreign exchange rates, stocks, etc. Usually, this leads to a knowledge of the joint distributions and complicated integration procedures. This paper devel...
This study investigates the pricing formula for European options when the underlying asset follows a fuzzy mixed weighted fractional Brownian motion within a jump environment. We construct a pricing model for European options driven by fuzzy mixed we...
When trading in the call and put contracts of option chains, the portfolios of strikes must be selected. The trader must also decide whether to take long or short positions at the selected strikes. Dynamic strategies for making these decisions are di...
This paper investigates pricing formulas for geometric average and arithmetic average Asian call and put options under an uncertain exponential Ornstein–Uhlenbeck stock model. Employing the
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