State-dependent jump risks for American gold futures option pricing

Lian, Yu-Min; Liao, Szu-Lang; Chen, Jun-Home

doi:10.1016/j.najef.2015.04.001

Cited by 14 publications

(2 citation statements)

References 41 publications

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“…Early-exercise stock option valuation has been an important research subject for the past four decades (e.g., Geske and Johnson, 1984;Longstaff and Schwartz, 2001;Fang and Oosterlee, 2009b;Yu and Xie, 2015;Lian et al, 2015;Li et al, 2019). Numerical methods based on fast Fourier transform (FFT) are traditionally very efficient at pricing options due to the existence of the 5 characteristic functions of asset price dynamics.…”

Section: Introductionmentioning

confidence: 99%

Hedging and pricing early-exercise options with complex fourier series expansion

Chan

2020

The North American Journal of Economics and Finance

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We introduce a new numerical method called the complex Fourier series (CFS) method proposed by Chan (2017) to price options with an early-exercise feature-American, Bermudan and discretely monitored barrier options-under exponential Lévy asset dynamics. This new method allows us to quickly and accurately compute the values of early-exercise options and their Greeks. We also provide an error analysis to demonstrate that, in many cases, we can achieve an exponential convergence rate in the pricing method as long as we choose the correct truncated computational interval. Our numerical analysis indicates that the CFS method is computationally more comparable or favourable than the methods currently available. Finally, the superiority of the CFS method is illustrated with real financial data by considering Standard & Poor's depositary receipts (SPDR) exchange-traded fund (ETF) on the S&P 500 R index options, which are American options traded

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Section: Introductionmentioning

confidence: 99%

Hedging and pricing early-exercise options with complex fourier series expansion

Chan

2020

The North American Journal of Economics and Finance

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“…(We refer to Hui (1997) and Guillaume (2003).) Moreover, non-Black-Scholes models have been considered in pricing options (Lian, Liao, & Chen, 2015;Lin, Huang, & Li, 2015). In particular, non-Black-Scholes models have been adopted to study barrier options; for instance, the constant elasticity of variance (CEV) model in Boyle and Tian (1999) and a jump diffusion model in Kou and Wang (2004).…”

Section: Introductionmentioning

confidence: 99%