A dynamic programming approach to price installment options
TLDR
A dynamic programming procedure to price installment options is developed that yields monotonically converging prices, and satisfactory trade-offs between accuracy and computational time.About:
This article is published in European Journal of Operational Research.The article was published on 2006-03-01 and is currently open access. It has received 33 citations till now. The article focuses on the topics: Valuation of options.read more
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Journal ArticleDOI
Dynamic Programming Approach for Valuing Options in the GARCH Model
TL;DR: An efficient algorithm based on dynamic programming coupled with piecewise polynomial approximation to compute the value of a given option, at all observation dates and levels of the state vector is developed.
Book ChapterDOI
Instalment Options: A Closed-Form Solution and the Limiting Case
TL;DR: In this paper, the authors derive a closed-form solution to the value of an option in the Black-Scholes model and prove that the limiting case of an Instalment option with a continuous payment plan is equivalent to a portfolio consisting of a European Vanilla option and an American Put on this Vanilla option with time-dependent strike.
Journal ArticleDOI
Valuation of American Continuous-Installment Options
Pierangelo Ciurlia,Ilir Roko +1 more
TL;DR: In this paper, the authors presented three approaches to value American continuous-installment options written on assets without dividends or with continuous dividend yield, and derived closed-form formulas by approximating the optimal stopping and exercise boundaries as multipiece exponential functions, which is compared to the finite difference method to solve the inhomogeneous Black-Scholes PDE and a Monte Carlo approach.
Journal ArticleDOI
Valuing continuous-installment options
TL;DR: Valuing European continuous-installment options written on dividend-paying assets in the standard Black-Scholes-Merton framework using the Laplace transform approach, which results in explicit Laplace transforms of the initial premium as well as its Greeks, which include the transformed stopping boundary in a closed form.
Journal ArticleDOI
Equity warrants pricing model under Fractional Brownian motion and an empirical study
TL;DR: This paper construct equity warrants pricing model under Fractional Brownian motion, deduce the European options pricing formula with a simple method, then propose the warrants pricing formula, and extend it to cover equity warrants on a stock providing dividends.
References
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Journal ArticleDOI
Pricing Warrants: An Empirical Study of the Black‐Scholes Model and Its Alternatives
Beni Lauterbach,Paul Schultz +1 more
TL;DR: This article used a sample of over 25,000 daily warrant prices to empirically investigate potential problems with the commonly used warrant pricing model proposed by Black and Scholes as an extension of their call option model.
Journal ArticleDOI
Pricing, no-arbitrage bounds and robust hedging of instalment options
TL;DR: In this article, the authors discuss pricing and risk management for installment options, in particular the use of static hedges, and also study a continuous-time limit in which premium is paid at a certain rate per unit time.
Journal ArticleDOI
A Dynamic Programming Procedure for Pricing American-Style Asian Options
TL;DR: A procedure for pricing American-style Asian options of the Bermudan flavor, based on dynamic programming combined with finite-element piecewise-polynomial approximation of the value function, is developed here.
Book ChapterDOI
The Evaluation of Venture Capital as an Instalment Option: Valuing Real Options Using Real Options
TL;DR: In this article, a real option analysis has been proposed to evaluate staged financing of Venture Capital projects but many of the input parameters to option pricing models are unobservable leading to option evaluation that is not preference free.