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Asset Pricing with Speculative Trading
Speculative trading stems from disagreements among traders. Besides the approaches based on the existence of private information (and noise traders) or the di erences of opinions, Harrison and Kreps(1978) and Morris(1996) relied on the presence of diverse beliefs to explain speculative phenomena. This paper proposes a new model of speculative trading by introducing rational beliefs of […]
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book Black-Scholes Option Pricing Model
Pricing Model Finance is one of the most rapidly changing and fastest growing areas in the corporate business world. Because of this rapid change, modern nancial instruments have become extremely complex. New mathematical models are essential to implement and price these new nancial instruments. The world of corporate nance once managed by business students is […]
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Cantor – 1997 – Split Ratings and the Pricing of Credit Risk
Despite the fact that over 50 percent of all corporate bonds have different ratings from Moody’s and Standard and Poor’s at issuance, most bond pricing models ignore these differences of opinion. Our work compares a number of different methods of accounting for split ratings in estimating bond pricing models. We find that pricing rules that […]
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INTRODUCTION TO ARBITRAGE PRICING OF FINANCIAL DERIVATIVES
that is {{g(ST ) =½ST ¡ K if ST > K (option is exercised),0 if ST · K (option is abandoned).}} In fact, if at the expiry date T the stock price is lower than the strike price, the holder of the call option can purchase an underlying stock directly on a spot (i.e., cash) […]
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Jaeckel P. Monte-Carlo methods in finance
An invaluable resource for quantitative analysts who need to run models that assist in option pricing and risk management. This concise, practical hands on guide to Monte Carlo simulation introduces standard and advanced methods to the increasing complexity of derivatives portfolios. Ranging from pricing more complex derivatives, such as American and Asian options, to measuring […]
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Sheldon Natenberg,option Volatility & Pricing – Advanced Trading Strategies And Techniques
One of the most widely read books among active option traders around the world, “Option Volatility & Pricing” has been completely updated to reflect the most current developments and trends in option products and trading strategies.Featuring: Pricing models Volatility considerations Basic and advanced trading strategies Risk management techniques And more!Written in a clear, easy-to-understand fashion, […]