An Introduction to Financial Option Valuation 8 pdf

... problem and it is marvelously intuitive. MARK P. KRITZMAN (Kritzman, 2000) To put it simply, if there is an arbitrage price, any other price is too dangerous to quote. MARTIN BAXTER AND ANDREW ... is to scale the option values by the asset price, by letting c := C S , for a call option, and p := P S , for a put option. In these new variables, d 1 and d 2 in (8. 20) and (8. 21) s...

Ngày tải lên: 20/06/2014, 18:20

... 133 Black–Scholes formula, 80 82 , 105, 131 cash-or-nothing, 164–166 down-and-out call, 189 European call, 81 , 83 , 89 European put, 81 , 83 , 92 geometric average price Asian call, 1 98 up-and-out call, 190 Black–Scholes ... formulas, 82 , 83 Black–Scholes PDE, 73, 78, 80 , 81 , 83 , 99, 101–103, 165, 166, 239, 251, 257–262 American put, 174–176 barrier option, 190 down-and-...

Ngày tải lên: 21/06/2014, 07:20

... European calls and puts. The t = T condition for a European call, (8. 16), becomes the τ = 0 condition C(S, 0) = max(S(0) − E, 0). (24.2) Similarly, the European put condition (8. 25) changes to P(S, ... (Clewlow and Strickland, 19 98; Kwok, 19 98; Wilmott, 19 98; Wilmott et al., 1995; Seydel, 2002) are good sources for more details about the application of finite differences to option...

Ngày tải lên: 20/06/2014, 18:20

... G. and E. J. Stapleton (19 98) Fast accurate binomial pricing of options. Finance and Stochastics, 2:3–17. Rogers, L. C. G. and O. Zane (1999) Saddle-point approximations to option prices. Annals ... Index dividends, 49, 182 double barrier option, 191 down-and-in call, 188 , 189 down-and-in put, 190 down-and-out call, 187 – 189 , 260–261, 265 down-and-out put, 190 drift, 54, 105, 1 98...

Ngày tải lên: 20/06/2014, 18:20

... MathWorks, Inc. AN INTRODUCTION TO FINANCIAL OPTION VALUATION Mathematics, Stochastics and Computation This is a lively textbook providing a solid introduction to financial option valuation for ... for cash-or-nothing options 167 17.6 Notes and references 1 68 17.7 Program of Chapter 17 and walkthrough 170 18 American options 173 18. 1 Motivation 173 18. 2 American cal...

Ngày tải lên: 20/06/2014, 18:20

... rand and randn to generate U(0, 1) and N(0, 1) samples, respectively. To make the experiments reproducible, we set the random number generator seed to 100; that is, we used rand(‘state’,100) and ... verify that an N(µ, σ 2 ) random variable has mean µ and variance σ 2 . 3.9.  Show that N(x) in (3. 18) satisfies N(α) + N(−α) = 1. 3 .8 Program of Chapter 3 and walkthrough As an alte...

Ngày tải lên: 20/06/2014, 18:20

... known to investors, and hence any change in the price is due to new information. We may build this into our model by adding a ran- dom ‘fluctuation’ increment to the interest rate equation and making ... Stock Exchange: www.amex.com/, the Chicago Board Options Exchange: www. cboe.com/Home/, the London Stock Exchange: www.londonstockexchange. com/, the New York Stock Exchange: www.nyse.co...

Ngày tải lên: 20/06/2014, 18:20

... relation (8. 3). [Hint: use Exer- cise 3.7.] 8. 2.  Show that (8. 21) can be replaced by (8. 22). 8. 3. Confirm that C(S, t) in (8. 19) satisfies (8. 16), (8. 17) and (8. 18) . [Hint: to deal with (8. 16), ... formulas (8. 19) and (8. 24). 8. 7. Show that lim E→0 C(S, t) = S in (8. 19) and lim E→0 P(S, t) = 0in (8. 24), and give a financial interpretation of the results. 8. 8. W...

Ngày tải lên: 20/06/2014, 18:20

... price Option price 5125 475 5225 405 5325 340 5425 280 1 2 5525 226 5625 179 1 2 5725 139 582 5 105 5100 5200 5300 5400 5500 5600 5700 580 0 5900 0.172 0.174 0.176 0.1 78 0. 18 0. 182 0. 184 0. 186 0. 188 0.19 0.192 Exercise ... number generators to compute estimates of expected values was touched on in Chapter 4. Here we pull these two threads together and introduce the Monte Car...

Ngày tải lên: 20/06/2014, 18:20

... put options. 18. 3 Black–Scholes for American options Our aim in this section is to show how the arguments in Chapter 8 that led to the Black–Scholes PDE can be adapted to cover an American put option. ... the Black–Scholes analysis, places analytic formulas out of reach, and puts a strain on computational methods. 18. 2 American call and put An American option is like a Euro...

Ngày tải lên: 20/06/2014, 18:20