Methods for Pricing and Hedging Plain Vanilla Barrier Options PDF Download
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Author: Emmanuel Deogratias
Publisher: LAP Lambert Academic Publishing
ISBN: 9783659362316
Category :
Languages : en
Pages : 124
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Book Description
The Black Scholes Model (1973) is used to price and hedge plain vanilla barrier options on a non dividend paying asset. Under this model, Monte Carlo Simulation, Stratified sampling, Simpson's rule, Trapezoidal rule and Antithetic variable techniques have been used to determine the value and hedging portfolio of a plain vanilla barrier option. Also stochastic dynamic programming has been developed so as to determine the price and hedging portfolio of the option. Finally the methods are compared to each other in terms of accuracy. It is found that stratified sampling technique is the best method after comparing with other methods.
Author: Emmanuel Deogratias
Publisher: LAP Lambert Academic Publishing
ISBN: 9783659362316
Category :
Languages : en
Pages : 124
Get Book Here
Book Description
The Black Scholes Model (1973) is used to price and hedge plain vanilla barrier options on a non dividend paying asset. Under this model, Monte Carlo Simulation, Stratified sampling, Simpson's rule, Trapezoidal rule and Antithetic variable techniques have been used to determine the value and hedging portfolio of a plain vanilla barrier option. Also stochastic dynamic programming has been developed so as to determine the price and hedging portfolio of the option. Finally the methods are compared to each other in terms of accuracy. It is found that stratified sampling technique is the best method after comparing with other methods.
Author: Leonardo Marroni
Publisher: John Wiley & Sons
ISBN: 1119954584
Category : Business & Economics
Languages : en
Pages : 277
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Book Description
The only guide focusing entirely on practical approaches to pricing and hedging derivatives One valuable lesson of the financial crisis was that derivatives and risk practitioners don't really understand the products they're dealing with. Written by a practitioner for practitioners, this book delivers the kind of knowledge and skills traders and finance professionals need to fully understand derivatives and price and hedge them effectively. Most derivatives books are written by academics and are long on theory and short on the day-to-day realities of derivatives trading. Of the few practical guides available, very few of those cover pricing and hedging—two critical topics for traders. What matters to practitioners is what happens on the trading floor—information only seasoned practitioners such as authors Marroni and Perdomo can impart. Lays out proven derivatives pricing and hedging strategies and techniques for equities, FX, fixed income and commodities, as well as multi-assets and cross-assets Provides expert guidance on the development of structured products, supplemented with a range of practical examples Packed with real-life examples covering everything from option payout with delta hedging, to Monte Carlo procedures to common structured products payoffs The Companion Website features all of the examples from the book in Excel complete with source code
Author: Iain Douglas Clayton
Publisher:
ISBN:
Category :
Languages : en
Pages : 176
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Book Description
Author: Nassim Nicholas Taleb
Publisher: John Wiley & Sons
ISBN: 9780471152804
Category : Business & Economics
Languages : en
Pages : 536
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Book Description
Destined to become a market classic, Dynamic Hedging is the only practical reference in exotic options hedgingand arbitrage for professional traders and money managers Watch the professionals. From central banks to brokerages to multinationals, institutional investors are flocking to a new generation of exotic and complex options contracts and derivatives. But the promise of ever larger profits also creates the potential for catastrophic trading losses. Now more than ever, the key to trading derivatives lies in implementing preventive risk management techniques that plan for and avoid these appalling downturns. Unlike other books that offer risk management for corporate treasurers, Dynamic Hedging targets the real-world needs of professional traders and money managers. Written by a leading options trader and derivatives risk advisor to global banks and exchanges, this book provides a practical, real-world methodology for monitoring and managing all the risks associated with portfolio management. Nassim Nicholas Taleb is the founder of Empirica Capital LLC, a hedge fund operator, and a fellow at the Courant Institute of Mathematical Sciences of New York University. He has held a variety of senior derivative trading positions in New York and London and worked as an independent floor trader in Chicago. Dr. Taleb was inducted in February 2001 in the Derivatives Strategy Hall of Fame. He received an MBA from the Wharton School and a Ph.D. from University Paris-Dauphine.
Author: Peter H. Ritchken
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Pricing and hedging barrier options using a binomial lattice can be quite delicate. If the barrier is not constant, or if there are multiple barriers, then in all likelihood binomial lattices will produce erroneous answers even when a large number of time steps are used. While in some cases the time partitions of the binomial method can be carefully chosen so as to reduce the bias, for many barrier contracts more efficient procedures exist. This article explains how a very simple and extremely efficient trinomial lattice procedure can be used to price and hedge most types of exotic barriers.
Author: Alan Bogossian
Publisher:
ISBN:
Category :
Languages : en
Pages : 200
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Book Description
Author: Orcun Kaya
Publisher:
ISBN:
Category :
Languages : da
Pages : 68
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Book Description
Author: Vineer Bhansali
Publisher: McGraw-Hill Companies
ISBN:
Category : Business & Economics
Languages : en
Pages : 392
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Book Description
Table of Contents
Author: Marti G. Subrahmanyam
Publisher:
ISBN:
Category :
Languages : en
Pages : 44
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Book Description
In this paper, we propose an alternative approach for pricing and hedging non-standard American options. In principle, the proposed approach applies to any kind of American-style contract for which the payoff function has a Markovian representation in the state space. Specifically, we obtain an analytic solution for the value and hedge parameters of barrier options, an important example of path-dependent options. The solution includes standard American options as a special case. The analytic formula also allows us to identify and exploit two key properties of the optimal exercise boundary - homogeneity in price parameters and time-invariance - for American options. In addition, some new put-call ``symmetryquot; relations are also derived. These properties suggest a new, efficient and integrated approach to pricing and hedging a variety of standard and non-standard American options. From an implementation perspective, this approach avoids the current practice of repetitive computation of option prices and hedge ratios. Our implementation of the analytic formula for barrier options indicates that the proposed approach is both efficient and accurate in computing option values and option hedge parameters. In some cases, our method is substantially faster than existing numerical methods with equal accuracy. In particular, the method overcomes the difficulty that existing numerical methods have in dealing with prices close to the barrier, the case where the barrier matters most.
Author: Olaf Menkens
Publisher:
ISBN:
Category :
Languages : en
Pages : 45
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Book Description
This paper studies the pricing and hedging problem of European plain vanilla options in a modified Black-Scholes market. That is the price of the risky asset is allowed to jump, where the timing and the size of the jump is unknown (with no jump being possible as well). Using a superhedging approach, worst case pricing formulae, Greeks, and superhedging strategy for call and put options will be given in closed form (where the closed form is of the same level as the Black-Scholes solution) and will be discussed. Moreover, the worst case prices explain the volatility smile which can be observed in market data. Finally, the model is calibrated to market data.
