Journal articles: 'Options'

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Aninkan, A. S., B. O. Akinnuli, and M. K. Adeyeri. "Determination of supply conditions, scenarios and pay-off for industrial machinery supplier selection post economic and engineering considerations." Nigerian Journal of Technology 41, no. 6 (March 14, 2023): 971–79. http://dx.doi.org/10.4314/njt.v41i6.7.

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Supply conditions after economics and engineering considerations is important for consideration because machinery and equipment procurement is a tripod of which supply conditions is one. This study identified the attributes of supply conditions, different ways of combining the attributes using simple permutation and combination theories and determined the pay-off as well as the opportunity lost to every scenario used by method of Expected Decision Value (EDV). The attributes were identified as: Due Date of the Supply (A); Technical Capability of Vendor (B); After Sales Services (C); and Vendor’s Experience (D). Total number of scenarios were 15 of four (4) options. The pay-off with the opportunity lost to each selected option are: Option1 (25% against 75%); Option2 (50% against 50%); Option3 (75% against 25%); and Option4, 100% where the four (4) strategic decisions were all considered for selecting the supplier turns out to be optimum and in favour of purchaser. Further research in the area of development of a Surrogate Model for Industrial Machinery Supplier Selection Post Economics and Engineering Considerations is recommended.

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Liu, Zhenhao. "A Comparison of the Performance of Rainbow Options and Stocks under COVID-19 and Ukraine Conflict." Highlights in Business, Economics and Management 24 (January 22, 2024): 2399–406. http://dx.doi.org/10.54097/xax99y22.

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This paper hopes to explore which is the better choice for investors under the different environments of the US stock market, rainbow option or buying a single stock. Due to the improvement of the COVID-19 situation in the United States in 2021 and the introduction of government policies to stimulate the economy, the US stock market showed an upward trend throughout 2021. In 2022, due to the conflict between Russia and Ukraine, the global economy will be impacted, and the US stock market is no exception. In these two long-term bear markets and bull markets, it hopes to find a mutation option to control risks and improve returns. In this case, it focuses on rainbow options, which are options that help investors screen out the better-performing stocks or futures included in them. First, this paper paired 14 stocks in five fields, calculated the option’s payoff according to the rainbow option's rules, and then compared it with the return of the stock alone to explore the superiority of the rainbow option. The return on the rainbow option is higher than the return on any single stock. Then the option is simulated and priced for 1000 future trading days so as to obtain the return of the rainbow option under the assumption of stable fluctuation in the US stock market environment, which is used as the reference for pricing. Finally, the sensitivity analysis of options is conducted to study the main factors affecting the volatility of option premiums. The result is that the moves in rainbow options are always correlated with the stock that is more active.

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Fatone, Lorella, Marco Giacinti, Francesca Mariani, Maria Cristina Recchioni, and Francesco Zirilli. "Parallel option pricing on GPU: barrier options and realized variance options." Journal of Supercomputing 62, no. 3 (August 2, 2012): 1480–501. http://dx.doi.org/10.1007/s11227-012-0813-7.

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Šoltés, Michal, and Monika Harčariková. "Gold price risk management through Nova 3 option strategy created by barrier options." Investment Management and Financial Innovations 13, no. 1 (March 4, 2016): 49–0. http://dx.doi.org/10.21511/imfi.13(1).2016.04.

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The paper is focused on selected aspects of the hedging using of Nova 3 option strategy created by barrier options, which are appropriate tools widely used for risk management of high risk underlying assets. Financial risk management using option strategies is an effective solution for limiting the loss from underlying asset’s price development. The Nova 3 option strategy is suitable for hedging against increase in price of the underlying asset in case of its purchase in future. In our approach, European up and knock-in call options together with standard put and barrier put options are used for investigation of hedging strategies in increasing markets. Theoretical models of suitable hedged profit functions in analytical expressions are analyzed also from their benefits and risks point of view. Created combinations of these hedging variants have to meet the requirements of zero-cost option strategy. Based on the own theoretical results, the hedged profit portfolio is applied to SPDR Gold Shares, where due to the lack of data on real barrier option premiums, these were calculated according to Haug model. Designed secured variants through Nova 3 option strategy were analyzed and compared to each other with the recommendations of the best possibilities for investors

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WEIRICH, PAUL. "Intrinsic Utility's Compositionality." Journal of the American Philosophical Association 1, no. 3 (2015): 545–63. http://dx.doi.org/10.1017/apa.2014.15.

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ABSTRACT:To compare the options in a decision problem, a common method evaluates for each option the world that would result if the option were realized. This paper argues that one evaluation of an option's world, intrinsic utility, is compositional given a division of an option's world according to the option's consequences and other events. The argument first justifies the norm that an ideal agent should be intrinsically indifferent between two options’ worlds given that she is intrinsically indifferent between the options’ consequences. Then it uses this norm and the existence of intrinsic utilities respecting intrinsic indifference to establish intrinsic utility's compositionality. The results regulate human agents when they approximate ideal agents in pertinent respects. The paper begins with a general explanation of compositionality; the related phenomena of interchangeability, complementarity, and independence; and the effect on compositionality of context and arrangement of a composite's parts. After arguing for intrinsic utility's compositionality, the paper explains its role in decision theory.

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BRANGER, NICOLE, and CHRISTIAN SCHLAG. "OPTION BETAS: RISK MEASURES FOR OPTIONS." International Journal of Theoretical and Applied Finance 10, no. 07 (November 2007): 1137–57. http://dx.doi.org/10.1142/s0219024907004585.

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This paper deals with the problem of determining the correct risk measure for options in a Black–Scholes (BS) framework when time is discrete. For the purposes of hedging or testing simple asset pricing relationships previous papers used the "local", i.e., the continuous-time, BS beta as the measure of option risk even over discrete time intervals. We derive a closed-form solution for option betas over discrete return periods where we distinguish between "covariance betas" and "asset pricing betas". Both types of betas involve only simple Black–Scholes option prices and are thus easy to compute. However, the theoretical properties of these discrete betas are fundamentally different from those of local betas. We also analyze the impact of the return interval on two performance measures, the Sharpe ratio and the Treynor measure. The dependence of both measures on the return interval is economically significant, especially for OTM options.

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Wei, Tao, Fangpei Yang, and Hao Yu. "Pricing Asian Lookback Option based on Monte Carlo simulation." BCP Business & Management 26 (September 19, 2022): 775–87. http://dx.doi.org/10.54691/bcpbm.v26i.2038.

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With the emergence and development of exotic options, the diversity of securities has largely increased. However, existing types of popular exotic options seem to be either limited or inflexible to satisfy buyers' personal needs. As for the Lookback option and Asian option, the Lookback option’s application is limited in the OTC area with a high price. The Asian option is cheap but used mostly for hedging, leaving relatively little space for speculating. Thus, we created a new exotic option called the Asian Lookback option (ALB) as a combination and derivative of these two options with a flexible implementing way enabling both the requirements for hedging and speculating. In the process of building the model of ALB, these two options’ models are referenced, together with the widely used option pricing method Monte Carlo Simulations based on the assumptions of the Black-Scholes model. To simulate the practical function and price of ALB, we set a control experiment of the prices of four options: two types of ALB, Asian option, and Lookback option in three different markets (S&P 500, Corn, COMEX Gold). It is shown that the price of ALB can be switched from Asian-like to Lookback-like, realizing the function of customized usage from hedging to speculating. These results shed light on a more flexible and personalized development tendency of derivatives.

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Muthu, Subramanian Senthilkannan, Yi Li, J. Y. Hu, P. Y. Mok, and Xuemei Ding. "Eco-Impact of Plastic and Paper Shopping Bags." Journal of Engineered Fibers and Fabrics 7, no. 1 (March 2012): 155892501200700. http://dx.doi.org/10.1177/155892501200700103.

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This article describes the study of the eco-impact of plastic and paper bags using the life cycle impact assessment (LCIA) technique under three different options: usage and disposal criteria with the existing usage behavior to reuse and governmental policies to recycle (option1), usage and disposal criteria as per consumers’ perceptions if systems are in place (option2) and usage and disposal criteria in case of absence of recycling systems (option3). The first stage, which was the baseline for other options, comprised of the study of the eco-impact of plastic and paper bags in the manufacturing phase, without considering the usage and disposal phases. LCIA was performed by the Eco-indicator 99, a damage oriented method for LCIA in SIMAPRO 7.1. The single score values calculated by the Eco-indicator'99 were considered as a directive to compare the environmental impact made by plastic and paper bags and a detailed explanation of the results is provided in this article. The next stage was the study of the eco-impact of these bags including their usage and disposal phases. This was undertaken with the three different options as stated above and the results derived were compared with the results derived from the baseline study, which is the main focus of the study under discussion. The values for usage and end-of-life phases were obtained from the questionnaire survey of different user groups of shopping bags in China, Hong Kong and India. The results of this study show that the eco-impact of plastic and paper bags was very high if there were no usage and disposal options provided. When the eco-impact values from options of existing possibilities and consumers’ perception were compared, the eco-impact value was lower in option 1 in all the three countries for both types of bags, which is mainly attributed to the fact that in option 1, a higher percentage of reuse is preferred to recycle and disposal to landfill categories. Also the eco-impact of these two types of bags was studied with and without the presence of recycling systems in China, India and Hong Kong, where the eco-impact was lower due to the presence of recycling systems. The results indicate that a higher percentage of reuse could significantly trim down the eco-impact of plastic and paper bags. Consumers’ perceptions and usage behaviors in connection with respective government's policies and implementation of recycling systems could be highly decisive in reducing the eco-impact of plastic and paper shopping bags.

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Mohrschladt, Hannes, and Judith C. Schneider. "Option-implied skewness: Insights from ITM-options." Journal of Economic Dynamics and Control 131 (October 2021): 104227. http://dx.doi.org/10.1016/j.jedc.2021.104227.

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10

Guillaume, Tristan. "Multitouch Options." Journal of Risk and Financial Management 16, no. 6 (June 14, 2023): 300. http://dx.doi.org/10.3390/jrfm16060300.

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In this article, the multitouch option, also called the n-touch option (or the “baseball” option when n=3) is analyzed and valued in closed form. This is a kind of barrier option that has been traded for a long time on the markets, but that does not yet admit a known valuation formula. The multitouch option sets a gradual knock-out/knock-in mechanism based on the number of times the underlying asset has crossed a predefined barrier in various time intervals before expiry. The higher the number of predefined time intervals during which the barrier has been touched, the lower the value of a knock-out contract at expiry, and conversely for a knock-in one. Multitouch options can be viewed as an extension of step barrier options, preserving the ability of the latter to adjust the exposure to risk over time, while eliminating the notorious danger of “sudden death” that holders of step barrier options are faced with. They are thus less risky and more flexible than step barrier options, and all the more so when compared to standard barrier options. This article also provides closed-form valuation of multitouch options with nonstandard features such as an outside barrier or a barrier defined as a continuous function of time.

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Zhao, Yongfan. "Comparing the Payoff Differences Between the Barrier and European Options Based on the Black-sholes Model." BCP Business & Management 32 (November 22, 2022): 479–85. http://dx.doi.org/10.54691/bcpbm.v32i.2969.

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As more people want to invest in the options market, there are basic traditional options in the futures market, such as European options. Still, there are also some exotic options like the barrier option that is conditional on the stock price before expiration and is called a barrier (1). This paper analyzes the payoffs of European and barrier options based on the Black Scholes model by calculating them and comparing them. This study analysis of the results shows that the price of the barrier option is lower than that of the European option. The barrier option is essentially close to the European option under conditions. This article helps newcomers to the options and those unfamiliar with exotic options to understand the differences between barrier options and European options in terms of payoff.

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12

Kulcsár, Edina. "Managing risk using real options in company’s valuation." Acta Agraria Debreceniensis, no. 58 (April 8, 2014): 125–32. http://dx.doi.org/10.34101/actaagrar/58/1984.

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The valuation of company is very important because provides information about the current value/situation of company, and through this, provide the opportunity of choosing the best company’s growth alternatives. The future strategic decisions are characterized by lack of knowledge, information, so all measures of company’s growth are closely linked with uncertainty and risk. The company’s valuation process is also related with uncertainty and risk. The risk may result both from the assessed assets and the technique used. In literature, we could find three approaches for risk management: capital budgeting based method, methods based on portfolio analysis and real options approach of risk management. Among them, the real options based methods is the most revolutionary approach for risk management. The advantages of the method, consists in the fact, that the process of establishing strategic decisions integrates the possibility of reversibility, delay and rejections, which isn’t it possible at two previous methods. The method also takes into account the total risk of company, so both the company-specific and systematic risk. In this study, I have used one of the best-known real option based method, the Black-Scholes model, for determining the option’s value. Determination of option value is based on the data of enterprise, which was tested Monte Carlo simulation. One of the basic assumptions of the Black-Scholes model is that the value of option is influenced by several factors. The sensitivity of option’s value could be carried out with so-called “Greeks”.. In the study the sensitivity analysis, was carried out with indicators Delta (Δ), Gamma (Γ) and Vega (ν). The real options based risk management determinations were performed in the R-statistics software system, and the used modules are 'fPortofio' and 'mc2d'. By using of real options method, I have calculated the average value of company capital equal with 38.79 million. By using simulation was carried out 1000 runs. The results of this show a relatively low standard deviation, small interquartile range and normal distribution. In the calculation of indicator Delta, could be concluded the value of company moves in 0.831 proportion to the price of options, the standard deviations of index is low, so the real option based method could be used with success in company’s value estimation. The Gamma index shows the enterprise value is sensitive just for large changes. The result of Vega reflects the value of option, so the company’s value volatility, which is small in this case, but this means a volatility of value. In summary, we can conclude that the call options pricing model, well suited for the determination of company’s value.

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Bhat, Aparna, and Kirti Arekar. "Empirical Performance of Black-Scholes and GARCH Option Pricing Models during Turbulent Times: The Indian Evidence." International Journal of Economics and Finance 8, no. 3 (February 26, 2016): 123. http://dx.doi.org/10.5539/ijef.v8n3p123.

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Exchange-traded currency options are a recent innovation in the Indian financial market and their pricing is as yet unexplored. The objective of this research paper is to empirically compare the pricing performance of two well-known option pricing models – the Black-Scholes-Merton Option Pricing Model (BSM) and Duan’s NGARCH option pricing model – for pricing exchange-traded currency options on the US dollar-Indian rupee during a recent turbulent period. The BSM is known to systematically misprice options on the same underlying asset but with different strike prices and maturities resulting in the phenomenon of the ‘volatility smile’. This bias of the BSM results from its assumption of a constant volatility over the option’s life. The NGARCH option pricing model developed by Duan is an attempt to incorporate time-varying volatility in pricing options. It is a deterministic volatility model which has no closed-form solution and therefore requires numerical techniques for evaluation. In this paper we have compared the pricing performance and examined the pricing bias of both models during a recent period of volatility in the Indian foreign exchange market. Contrary to our expectations the pricing performance of the more sophisticated NGARCH pricing model is inferior to that of the relatively simple BSM model. However orthogonality tests demonstrate that the NGARCH model is free of the strike price and maturity biases associated with the BSM. We conclude that the deterministic BSM does a better job of pricing options than the more advanced time-varying volatility model based on GARCH.

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Choi, Won, Doobae Jun, and Hyejin Ku. "A Valuation Formula for Chained Options with n -Barriers." Journal of Mathematics 2022 (January 18, 2022): 1–10. http://dx.doi.org/10.1155/2022/9563019.

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This study examines chained options that are connected in the sense that another barrier option becomes active continuously after the underlying asset price crosses a primary barrier. These barrier options have several advantages. First, they preserve the merit of regular barrier options, but demand far lower option premiums, which appeal to option traders. Second, they reduce the higher risk of loss of double barrier options, making option strategies more profitable in certain cases. Third, they have closed-form pricing formulas, unlike double-barrier options, and, thus, avoid the complexity of option pricing. Therefore, they help to enlarge the range of trader’s choice according to a variety of demand of buyers. The values of chained options are compared to those of similar single- and double-barrier options. This study extends the chained option with two barriers to a generalized chained option with n -barriers. In addition, this paper proves the closed formulas of generalized chained options with n-barriers using mathematical induction.

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Martinkutė-Kaulienė, Raimonda. "EXOTIC OPTIONS: A CHOOSER OPTION AND ITS PRICING." Business, Management and Education 10, no. 2 (December 20, 2012): 289–301. http://dx.doi.org/10.3846/bme.2012.20.

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Financial instruments traded in the markets and investors’ situation in such markets are getting more and more complex. This leads to more complex derivative structures used for hedging that are harder to analyze and which risk is harder managed. Because of the complexity of these instruments, the basic characteristics of many exotic options may sometimes be not clearly understood. Most scientific studies have been focused on developing models for pricing various types of exotic options, but it is important to study their unique characteristics and to understand them correctly in order to use them in proper market situations. The paper examines main aspects of options, emphasizing the variety of exotic options and their place in financial markets and risk management process. As the exact valuation of exotic options is quite difficult, the article deals with the theoretical and practical aspects of pricing of chooser options that suggest a broad range of usage and application in different market conditions. The calculations made in the article showed that the price of the chooser is closely correlated with the choice time and low correlated with its strike price. So the first mentioned factor should be taken into consideration when making appropriate hedging and investing decisions.

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Abrahams, Jessie. "Option blocks that block options: exploring inequalities in GCSE and A Level options in England." British Journal of Sociology of Education 39, no. 8 (October 11, 2018): 1143–59. http://dx.doi.org/10.1080/01425692.2018.1483821.

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SEBEHELA, TUMELLANO. "GAME OPTIONS." Annals of Financial Economics 12, no. 03 (September 2017): 1750015. http://dx.doi.org/10.1142/s2010495217500154.

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This article illustrates concurrent values emanating from mergers in the REIT industry as prior studies on REIT mergers focused only single merger outcome(s). Concurrent values are disentangled using game theory. Results illustrate in game options, there are more than one option value. Finally, option investors can use game options to design arbitrage strategies.

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Li, Songsong, Yinglong Zhang, and Xuefeng Wang. "The Sunk Cost and the Real Option Pricing Model." Complexity 2021 (September 30, 2021): 1–12. http://dx.doi.org/10.1155/2021/3626000.

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Although the academic literature on real options has grown enormously over the past three decades, hitherto an accurate real option pricing model has not been developed for investment decision analyses. In this paper, we propose a real option pricing model based on sunk cost characteristics, which can estimate the value of real options more accurately. First, we explore the distinctive features that distinguish real options from financial options. The study shows that the distinguishing feature of the real options is the sunk cost, which does not exist in the financial options. Based on the sunk cost characteristic of real options, we find that the exercise conditions of real and financial options are different. Second, we introduce the sunk cost into the intrinsic value function of real options and establish a new real option pricing model. Finally, this paper also discusses the properties of the intrinsic value function and pricing model of real options. We find that the application of the Black–Scholes option pricing model will overestimate the value of real options.

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Adetunji, Olubanjo Michael, and Akintola Amos Owolabi. "Valuation of Interacting Time-to-Build and Growth Real Options in Infrastructure Investments." International Journal of Economics and Finance 8, no. 12 (November 17, 2016): 202. http://dx.doi.org/10.5539/ijef.v8n12p202.

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This paper argues that real options approach presents a better valuation approach for valuing infrastructure investments when compared to traditional discounted cash flow approach. Managerial flexibilities, in various forms of real options, can be incorporated into infrastructure projects to expand the projects’ values. The paper identifies two key types of real options present in infrastructure investments as time-to-build and growth options and extends an earlier developed closed-form option valuation formula to value these options. The paper uses a numerical case of investment in railroad infrastructure project and shows that both types of real options, when embedded in infrastructure projects, add values to the projects. It however shows that the value of growth option is far more than the value of time-to-build option as growth options create opportunities for follow-on investments. It also shows that when the two options are present in an infrastructure investment, the time-to-build real option interacts with the growth option to reduce the latter’s value.

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Kawanishi, Yasuhiro. "A New Type of Barrier Options: Lizard Option." Asia-Pacific Financial Markets 22, no. 1 (September 26, 2014): 75–86. http://dx.doi.org/10.1007/s10690-014-9193-8.

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Koussis, Nicos, and Michalis Makrominas. "Growth options, option exercise and firms’ systematic risk." Review of Quantitative Finance and Accounting 44, no. 2 (September 26, 2013): 243–67. http://dx.doi.org/10.1007/s11156-013-0405-5.

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Cox, Nicholas J. "Stata Tip 79: Optional Arguments to Options." Stata Journal: Promoting communications on statistics and Stata 9, no. 3 (September 2009): 504. http://dx.doi.org/10.1177/1536867x0900900312.

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DOKUCHAEV, NIKOLAI. "MULTIPLE RESCINDABLE OPTIONS AND THEIR PRICING." International Journal of Theoretical and Applied Finance 12, no. 04 (June 2009): 545–75. http://dx.doi.org/10.1142/s0219024909005348.

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We suggest a modification of an American option such that the option holder can exercise the option early before the expiration and can revert later this decision to exercise; it can be repeated a number of times. This feature gives additional flexibility and risk protection for the option holder. A classification of these options and pricing rules are given. We found that the price of some call options with this feature is the same as for the European call. This means that the additional flexibility costs nothing, similarly to the situation with American and European call options. For the market model with zero interest rate, the price of put options with this feature is also the same as for the standard European put options. Therefore, these options can be more competitive than the standard American options.

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Rosalina, Vina, and Rudianto Artiono. "Pemodelan Matematika Opsi Saham Karyawan Menggunakan Metode Trinomial yang Memperhitungkan Efek Dilusi." MATHunesa: Jurnal Ilmiah Matematika 11, no. 2 (August 31, 2023): 192–98. http://dx.doi.org/10.26740/mathunesa.v11n2.p192-198.

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Stock options are contracts involving two parties, namely the option seller (writer) and option buyer (holder), where the rights of the option buyer (holder) will be guaranteed by the option seller (writer) in selling or buying shares at an agreed price. (strike price) before or at maturity time. One type of development of stock options, namely Employee Stock Options (OSK) or commonly called Employee Stock Options, is an option where the beneficiary cannot sell or transfer the options given by the company because these options function as rewards and incentives for their employees so that in this case, employees has the right to stock options but has no obligation to buy them. This study aims to model employee stock options that take into account the dilution effect. The dilution effect is a decrease in the percentage of share ownership due to an increase in the total number of shares, but the investor does not participate in the issuance of new shares. This study uses the trinomial method where stock price movements will be seen by calculating forward and determining the option value backwards. For this method, the stock price movement model has three possible events, namely the stock price moves up, stays, or falls. This research produces a mathematical model that is used in determining the price of employee stock options by taking into account the dilution effect. Keywords: Employee Stock Options, Trinomial Method, Dilution Effects

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Mo, Di, Neda Todorova, and Rakesh Gupta. "Implied volatility smirk and future stock returns: evidence from the German market." Managerial Finance 41, no. 12 (December 7, 2015): 1357–79. http://dx.doi.org/10.1108/mf-04-2015-0097.

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Purpose – The purpose of this paper is to investigate the relationship between option’s implied volatility smirk (IVS) and excess returns in the Germany’s leading stock index Deutscher-Aktien Index (DAX) 30. Design/methodology/approach – The study defines the IVS as the difference in implied volatility derived from out-of-the-money put options and at-the-money call options. This study employs the ordinary least square regression with Newey-West correction to analyse the relationship between IVS and excess DAX 30 index returns in Germany. Findings – The authors find that the German market adjusts information in an efficient way. Consequently, there is no information linkage between option volatility smirk and market index returns over the nine years sample period after considering the control variables, global financial crisis dummies, and the subsample test. Research limitations/implications – This study finds that the option market and the DAX 30 index are informationally efficient. Implications of the findings are that the investors cannot profit from the information contained in the IVS since the information is simultaneously incorporated into option prices and the stock index prices. The findings of this study are applicable to other markets with European options and for market participants who seek to exploit short-term market divergence from efficiency. Originality/value – The relationship between IVS and stock price changes has not been investigated sufficiently in academic literature. This study looks at this relationship in the context of European options using high-frequency transactions data. Prior studies look at this relationship for only American options using daily data. Pricing efficiency of the European option market using high-frequency data have not been studied in the prior literature. The authors find different results for the German market based on this high-frequency data set.

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LIU, YU-HONG. "VALUATION OF COMPOUND OPTION WHEN THE UNDERLYING ASSET IS NON-TRADABLE." International Journal of Theoretical and Applied Finance 13, no. 03 (May 2010): 441–58. http://dx.doi.org/10.1142/s021902491000584x.

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After Geske (1979), compound options — options on options — have been employed in many fields in which real options are applied. The formula for a compound option is convenient to use in real project investment, but it has one drawback — the assets that underlie the compound options are usually non-tradable. This article addresses this issue and proposes two new compound option pricing formulae to overcome this drawback.

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Saleh, Shafira Fauziah, Embay Rohaeti, and Isti Kamila. "Solusi Numerik Persamaan Difusi menggunakan Finite Difference Method (FDM) Crank - Nicolson dalam Penentuan Harga Opsi Tipe Eropa." Interval : Jurnal Ilmiah Matematika 3, no. 1 (September 6, 2023): 25–37. http://dx.doi.org/10.33751/interval.v3i1.6001.

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Unstable movements in stock values make investors have to secure the shares they own in order to minimize the risk of loss during downtrend conditions, namely with options. Finite Difference Method (FDM) Crank Nicolson is an approach method for finding numerical solutions to option prices. The purpose of this study is to determine the price model of the European type call option and put option by transforming the stochastic differential equation into a diffusion equation form, then looking for a numerical solution using the Finite Difference Method (FDM) Crank Nicolson to determine the price of the European type call option and put option sold at a low prices (underprice). The data used in this study are the stock price and option price of the company Apple, Inc. in November 2020 to October 2021, with an options maturity time of 6 months from the last stock price. The results of this study obtained models for call options and European-type put options from diffusion equation transformations, and options that are sold at low prices, namely for call options with a strike price of $75, and put options with strike prices other than $215, $240, $245.

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Chance, Don M., and Tung-Hsiao Yang. "The Tradeoff Between Compensation and Incentives in Executive Stock Options." Quarterly Journal of Finance 01, no. 04 (December 2011): 733–66. http://dx.doi.org/10.1142/s2010139211000225.

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Because stock options have a dual role as both compensation and incentives, a portion of option value represents compensation and a portion represents incentives. We develop a model that measures the tradeoff between the compensation and incentive values of options. Empirical estimates over a 14-year period show that the median option contains $1.08 of incentives for every $1.00 of compensation and that option compensation is around 30% of total compensation. We also find that firms that use options more as a compensation device use fewer options and reduce other cash payments suggesting a resourceful and not abusive use of options.

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TSUZUKI, YUKIHIRO. "NO-ARBITRAGE BOUNDS ON TWO ONE-TOUCH OPTIONS." International Journal of Theoretical and Applied Finance 18, no. 03 (May 2015): 1550021. http://dx.doi.org/10.1142/s0219024915500211.

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This paper investigates no arbitrage relationships between the prices of two one-touch options with the same maturity but with different barrier levels. We find the no-arbitrage range of prices for a no-touch option, given the price of a second no-touch option and the prices of co-maturing vanilla call options. The upper and lower bounds are the cost of a super-replicating portfolio and a sub-replicating portfolio respectively. These consist of call options, put options, digital options and a one-touch option. We assume that the underlying process is a continuous martingale but do not postulate a model.

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Stamatopoulos, Nikitas, Daniel J. Egger, Yue Sun, Christa Zoufal, Raban Iten, Ning Shen, and Stefan Woerner. "Option Pricing using Quantum Computers." Quantum 4 (July 6, 2020): 291. http://dx.doi.org/10.22331/q-2020-07-06-291.

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We present a methodology to price options and portfolios of options on a gate-based quantum computer using amplitude estimation, an algorithm which provides a quadratic speedup compared to classical Monte Carlo methods. The options that we cover include vanilla options, multi-asset options and path-dependent options such as barrier options. We put an emphasis on the implementation of the quantum circuits required to build the input states and operators needed by amplitude estimation to price the different option types. Additionally, we show simulation results to highlight how the circuits that we implement price the different option contracts. Finally, we examine the performance of option pricing circuits on quantum hardware using the IBM Q Tokyo quantum device. We employ a simple, yet effective, error mitigation scheme that allows us to significantly reduce the errors arising from noisy two-qubit gates.

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Rigoli, Francesco, and Raymond Dolan. "Better than expected: the influence of option expectations during decision-making." Proceedings of the Royal Society B: Biological Sciences 285, no. 1893 (December 12, 2018): 20182472. http://dx.doi.org/10.1098/rspb.2018.2472.

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Our choices often arise from a consideration of options presented in a sequence (e.g. the products in a supermarket row). However, whether the precise sequential order of option presentation affects decision-making remains poorly understood. A recent model of choice proposes that, in a set of options presented sequentially, those that are better than expected will be perceived as more valuable, even when options are objectively equivalent within the set. Inspired by this proposal, we devised a novel decision-making task where we manipulated the order of option presentation together with expectations about option value. Even when we compared trials that were exactly equivalent except for option order, we observed a striking preference for options that were better than expected. Our findings show that expectations about options affect which option will be favoured within a sequence, an influence which is manifested as a preference for better-than-expected options. The findings have potential practical implications, as for example they may help policymakers in devising nudge strategies that rely on ad hoc option orders.

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KE, ZIWEI, and JOANNA GOARD. "PENALTY AMERICAN OPTIONS." International Journal of Theoretical and Applied Finance 22, no. 02 (March 2019): 1950001. http://dx.doi.org/10.1142/s0219024919500018.

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We present a new American-style option whereby on the event of exercise before expiry, the holder pays the writer a fee (which will be referred to as a ‘penalty’). The valuation of the option is not straightforward as it involves determining when it is optimal for the holder to exercise the option, leading to a free boundary problem. As most options in the traded markets have short maturities, accurate and fast valuations of such options are important. We derive analytic approximations for the value of the option with short times to expiry (up to [Formula: see text] months) and its optimal exercise boundary. Some properties of the option, such as the put–call relationship, are explored as well. Numerical experiments suggest that our solutions both for the optimal exercise boundary and option value provide very accurate results.

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Ryszard, Kokoszczyński, Sakowski Paweł, and Ślepaczuk Robert. "Which Option Pricing Model Is the Best? HF Data for Nikkei 225 Index Options." Central European Economic Journal 4, no. 51 (April 1, 2019): 18–39. http://dx.doi.org/10.1515/ceej-2018-0010.

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Abstract In this study, we analyse the performance of option pricing models using 5-minutes transactional data for the Japanese Nikkei 225 index options. We compare 6 different option pricing models: the Black (1976) model with different assumptions about the volatility process (realized volatility with and without smoothing, historical volatility and implied volatility), the stochastic volatility model of Heston (1993) and the GARCH(1,1) model. To assess the model performance, we use median absolute percentage error based on differences between theoretical and transactional options prices. We present our results with respect to 5 classes of option moneyness, 5 classes of option time to maturity and 2 option types (calls and puts). The Black model with implied volatility (BIV) comes as the best and the GARCH(1,1) as the worst one. For both call and put options, we observe the clear relation between average pricing errors and option moneyness: high error values for deep OTM options and the best fit for deep ITM options. Pricing errors also depend on time to maturity, although this relationship depend on option moneyness. For low value options (deep OTM and OTM), we obtained lower errors for longer maturities. On the other hand, for high value options (ITM and deep ITM) pricing errors are lower for short times to maturity. We obtained similar average pricing errors for call and put options. Moreover, we do not see any advantage of much complex and time-consuming models. Additionally, we describe liquidity of the Nikkei225 option pricing market and try to compare the results we obtain here with a detailed study for Polish emerging option market (Kokoszczyński et al. 2010b).

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Lin, Wensheng. "Black-Scholes Model’s application in rainbow option pricing." BCP Business & Management 32 (November 22, 2022): 500–507. http://dx.doi.org/10.54691/bcpbm.v32i.2988.

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In this paper, we use excel as a tool to explore the pricing of rainbow options and their advantages based on the Black-Scholes Model. Two-color rainbow options are mainly explored in the paper, in which the underlying stocks are Apple and ExxonMobil. Simulating the price of two stocks is performed through Excel. Return on the corresponding European options and rainbow options is obtained after that. Next, the differences between the return on rainbow options and European options and pricing on rainbow option are analyzed. Finally, sensitivity analysis is carried out to further explore rainbow option pricing.

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Arora, Manpreet Kaur, and Manpreet Arora. "Influence of Behavioral Factors on Early Exercise of Employee Stock Option: A Literature Review." ECS Transactions 107, no. 1 (April 24, 2022): 6175–84. http://dx.doi.org/10.1149/10701.6175ecst.

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Employee Stock Option Plans (ESOPs) have gained prominence as a successful HR strategy that improves the employees’ performance and enables the company to have an economic and strategic advantage. However, the time at which employees decide to exercise their options determines the incentive that they derive from the stock options granted to them. It is one of the crucial financial decisions which can have immense implications for both employers and employees. According to the Black Scholes Model, an option's value is maximum when it is held until maturity. But most employees exercise their options early, which comes with a cost to both the employee and the company. It can be attributed to the fact that when faced with financial decisions the individuals do not always refer to complex finance models and formulas and make decisions rationally. Instead they resort to mental accounting and shortcuts leading to bounded rationality that can unconsciously impact their decision-making process. This paper explores the literature available on behavioral factors and biases that in addition to rational factors can affect the exercise of employee stock options.

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Rhoades-Catanach, Shelley C. "Dot.com or Dot.bomb? The Unpleasant Tax Surprise of Stock Options in a Volatile Market." Issues in Accounting Education 18, no. 4 (November 1, 2003): 385–95. http://dx.doi.org/10.2308/iace.2003.18.4.385.

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This case explores the tax treatment of employee stock options as well as associated tax- and financial-planning issues. The number of employee stock option plans and related option grants has increased dramatically in the last decade. Today, senior management and rank-and-file workers alike often own substantial numbers of options and shares of employer stock acquired through the exercise of options. While these holdings can be valuable forms of compensation, exercising options also can be costly and risky. Early in 2000, following the stock market boom and its substantial decline later that same year, many employees who exercised options while the equity markets were at record highs were left with large tax bills. In some cases, the taxes owed exceeded the value of the optioned stock at year-end. This case details the tax and financial impact of option exercise on one employee that chose to retain optioned stock during the stock market crash of 2000. The educational objectives of the case include: (1) becoming familiar with the tax and financial aspects of compensatory stock options, (2) identifying the risks and rewards of option grant and exercise, (3) quantifying the cash inflows and outflows associated with stock options and their tax consequences, and (4) planning to maximize the after-tax value of stock option compensation. The case also discusses the tax treatment of options from the employer's perspective and the policy issues associated with tax deductions for option exercise.

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Boyle, Phelim P., and William R. Scott. "Executive Stock Options and Concavity of the Option Price." Journal of Derivatives 13, no. 4 (May 31, 2006): 72–84. http://dx.doi.org/10.3905/jod.2006.635422.

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Mintah, Kwabena, David Higgins, Judith Callanan, and Ron Wakefield. "Staging option application to residential development: real options approach." International Journal of Housing Markets and Analysis 11, no. 1 (February 5, 2018): 101–16. http://dx.doi.org/10.1108/ijhma-02-2017-0022.

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Purpose Real option valuation is capable of accounting for uncertainties in residential development projects but still lacks practical adoption due to limited evidence to support application of the theory in practice. The purpose of this paper is to use option valuation to value staging option embedded in residential projects and compare with results from DCF to determine which of the two methods delivers superior results. Design/methodology/approach The fuzzy payoff method (FPOM), a real options model that uses scenario planning approach to generate a range of figures, from which a single-numerical value is computed for decision-making. Findings The results showed that the use of a range of figures was able to represent uncertainties to a higher degree of accuracy than the static DCF. As a result, the FPOM was able to capture about 3 per cent of the value of the project that was missed by the DCF. The staging option offers an opportunity to abandon unprofitable phases of a project, thereby limiting downside losses. Thus, real option models are practically applicable to cases in property sector. Practical implications Residential property developers must consider flexibility in financial feasibility evaluation of development because of the embedded value in uncertain property projects. It is important to account for optionality in financial evaluation of property projects for value maximisation. Originality/value The FPOM has been used for the first time to evaluate a horizontal phasing of a residential development project.

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KIM, JUNSEOK, MINHYUN YOO, HYEJU SON, SEUNGGYU LEE, MYEONG-HYEON KIM, YONGHO CHOI, DARAE JEONG, and YOUNG ROCK KIM. "PATH AVERAGED OPTION VALUE CRITERIA FOR SELECTING BETTER OPTIONS." Journal of the Korea Society for Industrial and Applied Mathematics 20, no. 2 (June 25, 2016): 163–74. http://dx.doi.org/10.12941/jksiam.2016.20.163.

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Jensen, Bjarne Astrup, and Jørgen Aase Nielsen. "OPTION PRICING BOUNDS AND THE PRICING OF BOND OPTIONS." Journal of Business Finance & Accounting 23, no. 4 (June 1996): 535–56. http://dx.doi.org/10.1111/j.1468-5957.1996.tb01025.x.

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41

Watson, Joel. "On the outside-option principle with one-sided options." Economics Letters 191 (June 2020): 109110. http://dx.doi.org/10.1016/j.econlet.2020.109110.

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Ang, Kian-Ping, Shafiqur Rahman, and Kok-Hui Tan. "Option Implied Moments: An Application to Nikkei 225 Futures Options." Review of Pacific Basin Financial Markets and Policies 05, no. 03 (September 2002): 301–20. http://dx.doi.org/10.1142/s0219091502000821.

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This paper proposes an integrated process to recover the moments of the risk-neutral distribution using a Gram-Charlier expansion series and Rubinstein's implied binomial tree approach. The advantage of using the implied tree approach is that it accounts for the possibility of early exercise of American options. We apply the method to American-style options on Nikkei 225 futures. We then demonstrate how to use the implied moments for trading options.

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Trabold Apadula, Lauren, and Chrissy M. Martins. "When virtue is not an option: Decision making in unhealthy food choices." Nutrition and Health 25, no. 3 (May 30, 2019): 209–16. http://dx.doi.org/10.1177/0260106019850997.

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Background: Health conscious consumers often make choices from constrained sets of food options, such as a restaurant menu, in which healthy options may not be present. Aim: The aim of this research was to examine how different decision strategies, such as selection versus rejection, influence the food option chosen when a choice set is restricted to unhealthy options. The mediating role of anticipated guilt was also explored. Methods: An experiment was conducted using a hypothetical choice scenario, in which participants were randomly assigned to a decision making strategy (select versus reject), health objective (diet versus indulge), and relative preference for the options (choice between two preferred options versus one preferred and one non-preferred option) was manipulated. Results: When using a selection strategy, consumers are more likely to choose their most preferred option, regardless of their health objectives, but when using a rejection strategy, health conscious consumers are more likely to avoid their most preferred option and consume a lesser liked alternative. Further, this effect is driven by reduced feelings of guilt. Important boundary conditions include consumer preference for the food options, as health conscious consumers will not reject their favorite option if they do not like the alternative. Conclusions: Decision making strategy influences health conscious consumers’ choices between unhealthy food options.

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Nolet, Lise, and Blanche Bénéteau. "Options." Reflets: Revue d’intervention sociale et communautaire 2, no. 2 (1996): 167. http://dx.doi.org/10.7202/026141ar.

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Jackson, Jeanne, Allyn Rankin, Sue Siefken, and Florence Clark. "Options." Occupational Therapy In Health Care 6, no. 2-3 (January 1989): 197–214. http://dx.doi.org/10.1080/j003v06n02_14.

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Moore, Mike. "Options." Bulletin of the Atomic Scientists 52, no. 6 (November 1996): 2. http://dx.doi.org/10.1080/00963402.1996.11456665.

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Jackson, Jeanne, Allyn Rankin, Sue Siefken, and Florence Clark. "Options." Occupational Therapy In Health Care 6, no. 2 (September 21, 1989): 197–214. http://dx.doi.org/10.1300/j003v06n02_14.

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Foreshaw, Noelle. "Options…" Souls 12, no. 3 (August 20, 2010): 217. http://dx.doi.org/10.1080/10999949.2010.499786.

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Ma-Kellams, Christine. "Options." Prairie Schooner 93, no. 3 (2019): 133–40. http://dx.doi.org/10.1353/psg.2019.0050.

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Guo, Meiding. "Research On The Pricing Of Rainbow Option Based On The Geometric Brownian Motion Model: Case Of Pfizer & Walmart." BCP Business & Management 32 (November 22, 2022): 438–45. http://dx.doi.org/10.54691/bcpbm.v32i.2964.

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Trading financial derivatives become more and more popular in the modern life. The investor wants to purchase the financial derivative to receive more benefits. However, Option is the important component in the financial derivatives. Compared with Futures, Option can let investor feel more convenance since it acts as the contract. This research analyzes the price of the Rainbow Option in the Stock market. The Stock market includes two companies which are Pfizer and Walmart. The results shows that the Rainbow Option should be priced between max of call options and the sum of the options. It can testify the theory of rainbow Options‘ price successfully. Based on this research, the investor can understand the background and process of the rainbow Options‘ working. Combine with the feature of the rainbow options, the investor can make the proper investment decision in the different situations.

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Journal articles on the topic 'Options'

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