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Nonparametric American Option Pricing
Jamie Alcock,Trent A. Carmichael +1 more
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In this article, a nonparametric method to accurately price American option contingent claims is proposed, which uses only historical stock price data, not option price data to generate the American option price.Abstract:
We introduce a nonparametric method to accurately price American style contingent claims. This method uses only historical stock price data, not option price data, to generate the American option price. We test the accuracy of this method in a controlled experimental environment under both Black & Scholes (1973) and Heston (1993) assumptions and perform an error-metric analysis. These numerical experiments demonstrate that this method is an accurate and precise method of pricing American options under a variety of market conditions.read more
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Alternative Tilts for Nonparametric Option Pricing
Todd B. Walker,M. Ryan Haley +1 more
TL;DR: The authors generalizes the nonparametric approach to option pricing of Stutzer (1996) by demonstrating that the canonical valuation methodology in-troduced therein is one member of the Cressie-Read family of divergence mea- sures.
Journal ArticleDOI
Empirical Tests of Canonical Nonparametric American Option Pricing Methods
Jamie Alcock,Diana Auerswald +1 more
TL;DR: In this article, Alcock and Carmichael (2008) introduced a nonparametric method for pricing American style options that is derived from the canonical valuation developed by Stutzer (1996).
Journal ArticleDOI
Option pricing under GARCH models with Hansen's skewed-t distributed innovations
TL;DR: In this article, option pricing under GARCH models with Hansen's skewed-t distributed innovations is considered, and risk-neutralization is applied to the empirical distribution of the simulated sample paths rather than the innovations' parametric distribution.
Journal ArticleDOI
Semi-parametric estimation of American option prices
TL;DR: In this paper, a semi-parametric estimator of American option prices is proposed based on a parameterized stochastic discount factor and is nonparametric w.r.t. the historical dynamics of the Markovian state variables.
Journal ArticleDOI
Pricing American Options by Canonical Least-Squares Monte Carlo
TL;DR: In this article, a variation of canonical valuation called canonical least-squares Monte Carlo is proposed to price American options, which proceeds in three stages: first, given a set of historical gross returns (or price ratios) of the underlying for a chosen time interval, a discrete risk-neutral distribution is obtained via the canonical approach.
References
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Journal ArticleDOI
The Pricing of Options and Corporate Liabilities
Fischer Black,Myron S. Scholes +1 more
TL;DR: In this paper, a theoretical valuation formula for options is derived, based on the assumption that options are correctly priced in the market and it should not be possible to make sure profits by creating portfolios of long and short positions in options and their underlying stocks.
Journal ArticleDOI
Bootstrap Methods: Another Look at the Jackknife
TL;DR: In this article, the authors discuss the problem of estimating the sampling distribution of a pre-specified random variable R(X, F) on the basis of the observed data x.
Journal ArticleDOI
A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options
TL;DR: In this paper, a closed-form solution for the price of a European call option on an asset with stochastic volatility is derived based on characteristi c functions and can be applied to other problems.
Journal ArticleDOI
Valuing American Options by Simulation: A Simple Least-Squares Approach
TL;DR: In this paper, a new approach for approximating the value of American options by simulation is presented, using least squares to estimate the conditional expected payoff to the optionholder from continuation.
Valuing American Options by Simulation: A Simple Least-Squares Approach - eScholarship
TL;DR: In this article, a simple yet powerful new approach for approximating the value of American options by simulation is presented, based on the use of least squares to estimate the conditional expected payoff to the optionholder from continuation.
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