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Journal articles on the topic 'Options expiration'

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Published: 3 June 2025

Last updated: 31 July 2025

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1

Kumar, K. Kiran. "Does Short-dated Options Introduction Mitigate Expiry Day Effects? Evidence from the Introduction of Weekly Index Options." International Journal of Business & Economics (IJBE) 7, no. 1 (2022): 66–76. http://dx.doi.org/10.58885/ijbe.v07i1.066.kk.

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High volatility in the stock market is often attributed to derivative expirations. The National Stock Exchange of India, largest derivatives exchange in the world by number of contracts traded, introduced weekly or short-dated derivatives in Feb 2019 to mitigate the expiration day effects. The study empirically examines the return and volatility data surrounding expiration days during the period before and after the introduction of weekly derivatives. First, for the period before the introduction of weekly contracts, the study gathers empirical evidence suggesting the presence of upward shift

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Dash, Mihir. "Modeling of implied volatility surfaces of nifty index options." International Journal of Financial Engineering 06, no. 03 (2019): 1950028. http://dx.doi.org/10.1142/s2424786319500282.

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The implied volatility of an option contract is the value of the volatility of the underlying instrument which equates the theoretical option value from an option pricing model (typically, the Black–Scholes[Formula: see text]Merton model) to the current market price of the option. The concept of implied volatility has gained in importance over historical volatility as a forward-looking measure, reflecting expectations of volatility (Dumas et al., 1998). Several studies have shown that the volatilities implied by observed market prices exhibit a pattern very different from that assumed by the B

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Alobaidi, Ghada, and Roland Mallier. "Asymptotic analysis of American call options." International Journal of Mathematics and Mathematical Sciences 27, no. 3 (2001): 177–88. http://dx.doi.org/10.1155/s0161171201005701.

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American call options are financial derivatives that give the holder the right but not the obligation to buy an underlying security at a pre-determined price. They differ from European options in that they may be exercised at any time prior to their expiration, rather than only at expiration. Their value is described by the Black-Scholes PDE together with a constraint that arises from the possibility of early exercise. This leads to a free boundary problem for the optimal exercise boundary, which determines whether or not it is beneficial for the holder to exercise the option prior to expirati

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Shaikh, Imlak, and Puja Padhi. "Stylized patterns of implied volatility in India: a case study of NSE Nifty options." Journal of Indian Business Research 6, no. 3 (2014): 231–54. http://dx.doi.org/10.1108/jibr-12-2013-0103.

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Purpose – The aim of this study is to examine the “volatility smile” or/and “skew”, term structure and implied volatility surfaces based on those European options written in the standard and poor (S&P) Nifty equity index. The stochastic nature of implied volatility across strike price, time-to-expiration and moneyness violates the core assumption of the Black–Scholes option pricing model. Design/methodology/approach – The potential determinants of implied volatility are the degree of moneyness, time-to-expiration and the liquidity of the strikes. The empirical work has been expressed by me

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Shaikh, Imlak, and Puja Padhi. "The Behavior of Option’s Implied Volatility Index: a Case of India VIX." Verslas: Teorija ir Praktika 16, no. 2 (2015): 149–58. http://dx.doi.org/10.3846/btp.2015.463.

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The aim of this paper is to investigate the behavior of implied volatility in the form of day-of-the-week, year-of-the-month and surround the expiration of options. The persistence of volatility is modeled in ARCH/GARCH type framework. The empirical results have shown significant effects of the day-of-the-week, month-of-the-year and day of options expiration. The positive significant Monday effect explains that India VIX rises significantly on the initial days of the market opening, and the significant negative Wednesday effect shows that expected stock market volatility fall through Wednesday

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Shaikh, Imlak, and Puja Padhi. "The Behavior of Option's Implied Volatility Index: a Case of India VIX." Business: Theory and Practice 16, no. (2) (2015): 149–58. https://doi.org/10.3846/btp.2015.463.

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The aim of this paper is to investigate the behavior of implied volatility in the form of day-of-the-week, year-of-the-month and surround the expiration of options. The persistence of volatility is modeled in ARCH/GARCH type framework. The empirical results have shown significant effects of the day-of-the-week, month-of-the-year and day of options expiration. The positive significant Monday effect explains that India VIX rises significantly on the initial days of the market opening, and the significant negative Wednesday effect shows that expected stock market volatility fall through Wednesday

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Bakharev, V. V., and G. Yu Mityashin. "END-OF-LIFE PRODUCT PRICING MANAGEMENT AS A NEW MARKETING TOOL." ECONOMIC VECTOR 1, no. 24 (2021): 50–56. http://dx.doi.org/10.36807/2411-7269-2021-1-24-50-56.

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In this paper, the authors consider two options for managing goods with an expiring expiration date, the most preferable of which is the markdown of perishable goods. The authors note that in modern Russian conditions, the markdown of goods is equivalent to a sale that allows the retailer to make a profit, and the buyer to save money. However, the authors consider the markdown of goods with an expiring expiration date is a new, undervalued marketing tool that allows to increase the competitiveness of a retail trade enterprise. The paper offers 3 options for positioning discounted products: fin

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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 Europ

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Fernanda, Adeliya, and Najmah Rizqya Maliha Putri. "Optimizing Investment Strategies: A Case Study on JPMorgan Chase & Co. Stock Options Using the Black-Scholes Model and What-If Analysis in Excel." International Journal of Mathematics, Statistics, and Computing 2, no. 1 (2024): 25–31. http://dx.doi.org/10.46336/ijmsc.v2i1.63.

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This research focuses on applying the Black-Scholes Model to evaluate European options on JPMorgan Chase & Co. stocks. This model has been a critical foundation in evaluating financial instruments, especially options, since its development in 1973 by Fisher Black, Myron Scholes, and Robert Merton. The study utilizes secondary data from some sources to obtain current information regarding stock prices, strike prices, expiration time, volatility, and relevant risk-free interest rates for option valuation as of December 19, 2023. Through this approach, our aim is to gain a better understandin

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DOKUCHAEV, NIKOLAI. "MULTIPLE RESCINDABLE OPTIONS AND THEIR PRICING." International Journal of Theoretical and Applied Finance 12, no. 04 (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 mar

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Wandmacher, Ralf, and David J. Bradfield. "Nonparametric tests of strike price and expiration bias in the implied volatility of the South African All Share Index Future Contract." South African Journal of Business Management 29, no. 2 (1998): 77–87. http://dx.doi.org/10.4102/sajbm.v29i2.773.

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In this article we assess the appropriateness of the constant volatility assumption required by the Black (1976) option pricing model for options on the All Share Index future. The assessment uses similar nonparametric tests as implemented in Rubinstein for data recorded over the 1992 to 1996 period. In the nonparametric tests we focus on the examination of constant volatility across both striking prices as well as expiration dates. The nonparametric tests are not only based on traditional measures of statistical significance to examine the constant volatility assumption, but also utilize a me

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ZENG, PINGPING, YUE KUEN KWOK, and WENDONG ZHENG. "FAST HILBERT TRANSFORM ALGORITHMS FOR PRICING DISCRETE TIMER OPTIONS UNDER STOCHASTIC VOLATILITY MODELS." International Journal of Theoretical and Applied Finance 18, no. 07 (2015): 1550046. http://dx.doi.org/10.1142/s0219024915500466.

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Timer options are barrier style options in the volatility space. A typical timer option is similar to its European vanilla counterpart, except with uncertain expiration date. The finite-maturity timer option expires either when the accumulated realized variance of the underlying asset has reached a pre-specified level or on the mandated expiration date, whichever comes earlier. The challenge in the pricing procedure is the incorporation of the barrier feature in terms of the accumulated realized variance instead of the usual knock-out feature of hitting a barrier by the underlying asset price.

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Xue, Shan, Ye Du, and Liang Xu. "Tighter Robust Upper Bounds for Options via No-Regret Learning." Proceedings of the AAAI Conference on Artificial Intelligence 37, no. 4 (2023): 5348–56. http://dx.doi.org/10.1609/aaai.v37i4.25666.

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Classic option pricing models, such as the Black-Scholes formula, often depend on some rigid assumptions on the dynamics of the underlying asset prices. These assumptions are inevitably violated in practice and thus induce the model risk. To mitigate this, robust option pricing that only requires the no-arbitrage principle has attracted a great deal of attention among researchers. In this paper, we give new robust upper bounds for option prices based on a novel η-momentum trading strategy. Our bounds for European options are tighter for most common moneyness, volatility, and expiration date se

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Iron, Yonatan, and Yuri Kifer. "Error Estimates for Binomial Approximations of Game Put Options." ISRN Probability and Statistics 2014 (January 30, 2014): 1–26. http://dx.doi.org/10.1155/2014/743030.

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A game or Israeli option is an American style option where both the writer and the holder have the right to terminate the contract before the expiration time. Kifer (2000) shows that the fair price for this option can be expressed as the value of a Dynkin game. In general, there are no explicit formulas for fair prices of American and game options and approximations are used for their computations. The paper by Lamberton (1998) provides error estimates for binomial approximation of American put options and here we extend the approach of Lamberton (1998) in order to obtain error estimates for b

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15

Ekström, Erik. "Russian options with a finite time horizon." Journal of Applied Probability 41, no. 2 (2004): 313–26. http://dx.doi.org/10.1239/jap/1082999068.

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We investigate the Russian option with a finite time horizon in the standard Black–Scholes model. The value of the option is shown to be a solution of a certain parabolic free boundary problem, and the optimal stopping boundary is shown to be continuous. Moreover, the asymptotic behavior of the optimal stopping boundary near expiration is studied.

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Ekström, Erik. "Russian options with a finite time horizon." Journal of Applied Probability 41, no. 02 (2004): 313–26. http://dx.doi.org/10.1017/s0021900200014327.

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We investigate the Russian option with a finite time horizon in the standard Black–Scholes model. The value of the option is shown to be a solution of a certain parabolic free boundary problem, and the optimal stopping boundary is shown to be continuous. Moreover, the asymptotic behavior of the optimal stopping boundary near expiration is studied.

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Jafri, Haya. "A Comprehensive Methodology for Analysing Options Trading: Utilizing Historical Data and the Black-Scholes Model." International Journal for Research in Applied Science and Engineering Technology 12, no. 9 (2024): 282–87. http://dx.doi.org/10.22214/ijraset.2024.64180.

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This paper presents a systematic methodology for analysing options trading, integrating user inputs with historical stock data to facilitate informed decision-making. The process begins with the collection of user-specified stock tickers and expiration dates, followed by the retrieval of historical price data to assess past stock performance. Key components of the analysis include calculating historical volatility, fetching the option chain, and filtering options into put and call categories. The methodology employs the Black-Scholes model to estimate fair option prices, which are further eval

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Son, Kyung-Woo, and Sang-Su Kim. "Liquidity Discount Value of ITM Option." Journal of Derivatives and Quantitative Studies 22, no. 4 (2014): 699–722. http://dx.doi.org/10.1108/jdqs-04-2014-b0005.

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KOSPI 200 index option market is one of the markets which is perfectly liquid in the world. While ATM options and OTM options are liquid, ITM options are not. This paper derives LDV (liquidity discount value) from the ITM options by using the no-arbitrage condition of synthetic futures considering market friction. In this paper, we show that theoretically derived LDV is related to trading volume as standard proxy of liquidity measure and LDV in ITM options exhibit a U-shaped pattern across moneyness. Other findings are that the expected returns from the synthetic futures arbitrage trading cons

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Ibrahim, Riza Andrian, Astrid Sulistya Azahra, and Kalfin. "Basic Concepts of Stock Option Pricing Models Traded in the Capital Market." International Journal of Mathematics, Statistics, and Computing 2, no. 4 (2024): 147–52. http://dx.doi.org/10.46336/ijmsc.v2i4.141.

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An option, in the world of capital markets, is a right based on an agreement to buy or sell a commodity, financial securities, or a foreign currency at an agreed price at any time within a three-month contract period. Factors that determine the value of an option include the current price of the stock, intrinsic value, expiration time or time value, volatility, interest rate, and cash dividends paid. Some options pricing models use this parameter to determine the fair market value of an option. This paper aims to learn the basic concepts of option pricing. The method used in studying the prici

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Chamberlain, Trevor W., C. Sherman Cheung, and Clarence C. Y. Kwan. "Expiration-Day Effects of Index Futures and Options: Some Canadian Evidence." Financial Analysts Journal 45, no. 5 (1989): 67–71. http://dx.doi.org/10.2469/faj.v45.n5.67.

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21

Raasch, Christina. "Strategic options to tackle patent expiration: theoretical framework and case studies." International Journal of Intellectual Property Management 3, no. 3 (2009): 278. http://dx.doi.org/10.1504/ijipm.2009.024406.

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Lien, Donald, and Li Yang. "Options expiration effects and the role of individual share futures contracts." Journal of Futures Markets 23, no. 11 (2003): 1107–18. http://dx.doi.org/10.1002/fut.10100.

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Choi, Byung-Wook. "A Study on the Option Selection of Informed Traders: A Case of Korean Index Options." Institute of Management and Economy Research 14, no. 2 (2023): 33–49. http://dx.doi.org/10.32599/apjb.14.2.202306.33.

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Purpose - The purpose of this study is to examine the option selection and optimal trading of informed traders in KOSPI 200 options market based on the PIN (probability of informed trading) model of Easley et al.(2002). Design/methodology/approach - This study uses TAQ (trade and quote) data provided by Korean Exchanges (KRX) which contains all the bids and trades recorded during the continuous auction trading hours for the KOSPI 200 options between May 2019 and September 2020. Findings - First, there was no difference in the PIN between call and put options in the 2019 data, but the PIN of pu

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Milian, Jonathan. "The Efficiency of Weekly Option Prices around Earnings Announcements." Journal of Risk and Financial Management 16, no. 5 (2023): 270. http://dx.doi.org/10.3390/jrfm16050270.

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This study examines the efficiency of weekly option prices around firms’ earnings announcements. With most of the largest firms now having options that expire on a weekly basis, option traders can hedge or speculate on earnings news using options that expire very close to a firm’s earnings announcement date. For earnings announcements near an options expiration date, one can estimate a firm’s expected stock price move in response to its earnings news (i.e., its option implied earnings announcement move) as the price of its at-the-money straddle as a proportion of its stock price. This study te

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Samsa, Greg. "If you plan to write a covered call option which will expire does traditional option pricing theory apply and, if not, what can replace the Greeks?" Archives of Business Research 8, no. 9 (2020): 27–36. http://dx.doi.org/10.14738/abr.89.8965.

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The primary goal of option pricing theory is to calculate the probability that an option will be exercised at expiration. These calculations are often summarized using "the Greeks", for example, theta is the expected change in the price of the option associated with a 1-unit change in time. Options can either be traded or held until expiration. If the investor's intention is to write a covered call option which will expire, and is indifferent between whether or not the option is exercised, then option pricing theory in general and the Greeks in particular are not directly relevant to them. Her

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Mao, Chenhui. "The Models of Option Pricing and Related Applications." Advances in Economics, Management and Political Sciences 201, no. 1 (2025): 184–87. https://doi.org/10.54254/2754-1169/2025.ld25330.

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As the economic market becomes increasingly prosperous, an option is a financial derivative contract that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price on or before a specified expiration date. Moreover, options are traded on various assets, including stocks, indices, commodities, and currencies. Then, option pricing is a fundamental topic in the field of financial mathematics and quantitative finance, which focuses on determining the fair value of options. Accordingly, there can be many different methods for the pricing models,

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MA, GUIYUAN, and SONG-PING ZHU. "Pricing American call options under a hard-to-borrow stock model." European Journal of Applied Mathematics 29, no. 3 (2017): 494–514. http://dx.doi.org/10.1017/s0956792517000262.

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While a classic result by Merton (1973,Bell J. Econ. Manage. Sci., 141–183) is that one should never exercise an American call option just before expiration if the underlying stock pays no dividends, the conclusion of a very recent empirical study conducted by Jensen and Pedersen (2016,J. Financ. Econ.121(2), 278–299) suggests that one should ‘never say never’. This paper complements Jensen and Pedersen's empirical study by presenting a theoretical study on how to price American call options under a hard-to-borrow stock model proposed by Avellaneda and Lipkin (2009,Risk22(6), 92–97). Our study

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SHU, Jiwu, Yonggeng GU, and Weimin ZHENG. "A NOVEL NUMERICAL APPROACH OF COMPUTING AMERICAN OPTION." International Journal of Foundations of Computer Science 13, no. 05 (2002): 685–93. http://dx.doi.org/10.1142/s0129054102001394.

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It is well acknowledged that the European options can be valued by an analytic formula, but situation is quite different for the American options. Mathematically, the Black-Scholes model for the American option pricing is a free boundary problem of partial differential equation. This model is a non-linear problem; it has no closed form solution. Although approximate solutions may be obtained by some numerical methods, but the precision and stability are hard to control since they are largely affected by the singularity at the exercise boundary near expiration date. In this paper, we propose a

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Zhu, Minting, Mancang Wang, and Jingyu Wu. "An Option Pricing Formula for Active Hedging Under Logarithmic Investment Strategy." Mathematics 12, no. 23 (2024): 3874. https://doi.org/10.3390/math12233874.

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Classic options can no longer meet the diversified needs of investors; thus, it is of great significance to construct and price new options for enriching the financial market. This paper proposes a new option pricing model that integrates the logarithmic investment strategy with the classic Black–Scholes theory. Specifically, this paper focus on put options, introducing a threshold-based strategy whereby investors sell stocks when prices fall to a certain value. This approach mitigates losses from adverse price movements, enhancing risk management capabilities. After deriving an analytical sol

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Miao, Yiyuan. "A Binomial Tree-Based Empirical Study on the Biases of American Call Option." Highlights in Business, Economics and Management 40 (September 1, 2024): 470–76. http://dx.doi.org/10.54097/z09bzy93.

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The application of financial derivatives, particularly options, has become pervasive in modern finance, offering effective tools for risk management. Among these, American options, allowing flexibility in exercising rights prior to expiration, dominate the derivatives market. Accurate pricing of American options is crucial for informed investment decisions and risk assessments. While various pricing models exist, the binomial tree model is welcomed for its simplicity and accessibility. However, inherent biases in pricing models raise questions about their efficacy across different sectors of t

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El kharrazi, Zaineb, Nouh Izem, Mustapha Malek, and Sahar Saoud. "A Partition of unity finite element method for valuation American option under Black-Scholes model." Moroccan Journal of Pure and Applied Analysis 7, no. 2 (2021): 324–36. http://dx.doi.org/10.2478/mjpaa-2021-0021.

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Abstract In this paper, we present an intelligent combination of partition of unity (PU) and finite element (FE) methods for valuing American option pricing problems governed by the Black-Scholes (BS) model. The model is based on a partial differential equation (PDE) from which one can deduce the Black-Scholes formula, which gives a theoretical estimated value of options using current stock prices, expected dividends, the option’s strike price, expected interest rates, time to expiration and expected volatility. Although the finite element method (FEM) seems to be an alternative tool for prici

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Chauhan, Arun, and Ravi Gor. "COMPARISON OF THREE OPTION PRICING MODELS FOR INDIAN OPTIONS MARKET." International Journal of Engineering Science Technologies 5, no. 4 (2021): 54–64. http://dx.doi.org/10.29121/ijoest.v5.i4.2021.203.

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  Black-Scholes option pricing model is used to decide theoretical price of different Options contracts in many stock markets in the world. In can find many generalizations of BS model by modifying some assumptions of classical BS model. In this paper we compared two such modified Black-Scholes models with classical Black-Scholes model only for Indian option contracts. We have selected stock options form 5 different sectors of Indian stock market. Then we have found call and put option prices for 22 stocks listed on National Stock Exchange by all three option pricing models. Finall

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Lee, Jae Ha, and Deok Hee Hahn. "Arbitrage Profitability of Box Spreads in the KOSPI200 Options Market." Journal of Derivatives and Quantitative Studies 14, no. 2 (2006): 109–37. http://dx.doi.org/10.1108/jdqs-02-2006-b0005.

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This study explores the arbitrage profitability of box spread strategies to test the KOSPI200 options market efficiency. using minute-by-minute data for the December 2003 - June 2004 period. The sample consists of 39.445 and 38.318 observations for small discrepancy and large discrepancy in exercise prices. respectively. In the case of credit box spreads, there were 681 (2%) and 2.293 (6%) arbitrage observations for small and large discrepancies, while debit box spreads showed 831 (2%) and 3.098 (8%) observations for small and large discrepancies. In general, mean profit and median profit were

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LI, WEIPING, and SU CHEN. "THE EARLY EXERCISE PREMIUM IN AMERICAN OPTIONS BY USING NONPARAMETRIC REGRESSIONS." International Journal of Theoretical and Applied Finance 21, no. 07 (2018): 1850039. http://dx.doi.org/10.1142/s0219024918500395.

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The early exercise premium and the price of an American put option are evaluated by using nonparametric regression on the time to expiration, the moneyness and the volatility of underlying assets. In terms of mean square error (MSE), our nonparametric methods of American put option pricings outperform the existing classical methods for both in-the-sample (1 September 2011–31 January 2012) and out-of-sample (1 September 2012–28 February 2013) testings on the S&P 100 Index (OEX). Our methods have better predictions and more accurate approximations. The Greek letters for both the early exerci

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Li, Pengshi, Yan Lin, and Yuting Zhong. "Patterns of 50 ETF Options Implied Volatility in China: On Implied Volatility Functions." E+M Ekonomie a Management 24, no. 1 (2021): 135–45. http://dx.doi.org/10.15240/tul/001/2021-1-009.

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The aim of this study is to examine the volatility smile based on the European options on Shanghai stock exchange 50 ETF. The data gives evidence of the existence of a well-known U-shaped implied volatility smile for the SSE 50 ETF options market in China. For those near-month options, the implied volatility smirk is also observed. And the implied volatility remains high for the short maturity and decreases as the maturity increases. The patterns of the implied volatility of SSE 50 ETF options indicate that in-the-money options and out-of-the-money options are more expensive relative to at-the

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Arepalli, Sruthi. "Ranibizumab Biosimilars for Neovascular Age-related Macular Degeneration, Macular Oedema with Retinal Vein Occlusion and Myopic Choroidal Neovascularization." US Ophthalmic Review 16, no. 2 (2022): 80. http://dx.doi.org/10.17925/usor.2022.16.2.80.

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Multiple disorders, such as neovascular age-related macular degeneration, diabetic macular oedema and myopic choroidal neovascularization require anti-vascular endothelial growth factor treatments to preserve and improve vision. In the last few decades, a multitude of options has arisen allowing for the best possible results. While the success of these drugs has been indisputable, the expiration or pending expiration of their patents creates an avenue for biosimilar medications to enter the market. These biosimilars can be produced at a discount compared with the original medications, with the

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Sudhakar, A., and Potharla Srikanth. "Determinants of In-the-money Expiration of Call Option Contracts—An Empirical Evidence from Call Options on Nifty 50 Index." Global Business Review 17, no. 6 (2016): 1373–87. http://dx.doi.org/10.1177/0972150916660402.

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Kang, Tae Hun. "Utilization of Weekly Options for the Improvement of the Volatility Index." Korean Journal of Financial Studies 51, no. 6 (2022): 755–85. http://dx.doi.org/10.26845/kjfs.2022.12.51.6.755.

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As the liquidity of KOSPI 200 index options is concentrated on the nearest expiration contract, the V-KOSPI 200 index, which is based on near- and next-term months options, fluctuates abnormally, and the designated market makers of V-KOSPI 200 futures suffer from hedging their inventory positions. This study suggests the volatility index, which includes KOSPI 200 weekly options instead of next-term monthly options. The index can mitigate rare spikes and the low volatility of the V-KOSPI 200 index, which mainly arise from stale market prices and low-frequency trading in the second and third con

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Leung, Tim, and Yoshihiro Shirai. "Optimal derivative liquidation timing under path-dependent risk penalties." Journal of Financial Engineering 02, no. 01 (2015): 1550004. http://dx.doi.org/10.1142/s234576861550004x.

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This paper studies the risk-adjusted optimal timing to liquidate an option at the prevailing market price. In addition to maximizing the expected discounted return from option sale, we incorporate a path-dependent risk penalty based on shortfall or quadratic variation of the option price up to the liquidation time. We establish the conditions under which it is optimal to immediately liquidate or hold the option position through expiration. Furthermore, we study the variational inequality associated with the optimal stopping problem, and prove the existence and uniqueness of a strong solution.

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Girish, G. P., and Nikhil Rastogi. "Efficiency of S&P CNX Nifty Index Option of the National Stock Exchange (NSE), India, using Box Spread Arbitrage Strategy." Gadjah Mada International Journal of Business 15, no. 3 (2014): 269. http://dx.doi.org/10.22146/gamaijb.5473.

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Box spread is a trading strategy in which one simultaneously buys and sells options having the same underlying asset and time to expiration, but different exercise prices. This study examined the efficiency of European style S&P CNX Nifty Index options of National Stock Exchange, (NSE) India by making use of high-frequency data on put and call options written on Nifty (Time-stamped transactions data) for the time period between 1st January 2002 and 31st December 2005 using box-spread arbitrage strategy. The advantages of box-spreads include reduced joint hypothesis problem since there is n

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Levy, Haim, and Young Hoon Byun. "An Empirical Test of the Black-Scholes Option Pricing Model and the Implied Variance: A Confidence Interval Approach." Journal of Accounting, Auditing & Finance 2, no. 4 (1987): 355–69. http://dx.doi.org/10.1177/0148558x8700200403.

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The empirical studies on the Black-Scholes (B-S) option pricing model have reported that the model tends to exhibit systematic biases with respect to the exercise price, time to expiration, and the stock's volatility. This paper attempts to test the B-S model with a new approach: derive the confidence interval of the model call option value based on the confidence interval of the. estimated variance. The test reports that even when the variance's confidence interval is considered, a systematic deviation between the theoretical “range” of the option price values and the observed market price st

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Yang, Cheol-Won. "An Empirical Analysis of Stock Price Manipulation in the Expiration Days of Futures and Options." Korean Journal of Financial Studies 47, no. 5 (2018): 709–39. http://dx.doi.org/10.26845/kjfs.2018.10.47.5.709.

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Shaikh, Imlak, and Puja Padhi. "On the relationship between implied volatility index and equity index returns." Journal of Economic Studies 43, no. 1 (2016): 27–47. http://dx.doi.org/10.1108/jes-12-2013-0198.

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Purpose – The purpose of this paper is to analyze the asymmetric contemporaneous relationship between implied volatility index (India VIX) and Equity Index (S & P CNX Nifty Index). In addition, the study also analyzes the seasonality of implied volatility index in the form of day-of-the-week effects and option expiration cycle. Design/methodology/approach – This study employs simple OLS estimation to analyze the contemporaneous relationship among the volatility index and stock index. In order to obtain robust results, the analysis has been presented for the calendar years and sub-periods.

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LAUKO, M., and D. ŠEVČOVIČ. "COMPARISON OF NUMERICAL AND ANALYTICAL APPROXIMATIONS OF THE EARLY EXERCISE BOUNDARY OF AMERICAN PUT OPTIONS." ANZIAM Journal 51, no. 4 (2010): 430–48. http://dx.doi.org/10.1017/s1446181110000854.

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AbstractWe present qualitative and quantitative comparisons of various analytical and numerical approximation methods for calculating a position of the early exercise boundary of American put options paying zero dividends. We analyse the asymptotic behaviour of these methods close to expiration, and introduce a new numerical scheme for computing the early exercise boundary. Our local iterative numerical scheme is based on a solution to a nonlinear integral equation. We compare numerical results obtained by the new method to those of the projected successive over-relaxation method and the analy

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PAN, MIN, and SHENGQIAO TANG. "OPTION PRICING AND EXECUTIVE STOCK OPTION INCENTIVES: AN EMPIRICAL INVESTIGATION UNDER GENERAL ERROR DISTRIBUTION STOCHASTIC VOLATILITY MODEL." Asia-Pacific Journal of Operational Research 28, no. 01 (2011): 81–93. http://dx.doi.org/10.1142/s0217595911003065.

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This article investigates the valuation of executive stock options when the stock return volatility is governed by the general error distribution stochastic volatility model, involving both the features of the stock return volatility and the abnormal fluctuations of the stock price at the expiration date. We estimate the parameters in the general error distribution stochastic volatility model using the Markov Chain Monte Carlo method with Shanghai & Shenzhen 300 Index in China as a sample, and compare the executive stock option values calculated by Black-Scholes option pricing model and th

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Figlewski, Stephen. "Risk-Neutral Densities: A Review." Annual Review of Financial Economics 10, no. 1 (2018): 329–59. http://dx.doi.org/10.1146/annurev-financial-110217-022944.

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Trading in options with a wide range of exercise prices and a single maturity allows a researcher to extract the market's risk-neutral density (RND) over the underlying price at expiration. The RND contains investors’ beliefs about the true probabilities blended with their risk preferences, both of which are of great interest to academics and practitioners alike. With a particular focus on US equity options, I review the historical development of this powerful concept, practical details of fitting an RND to options market prices, and the many ways in which investigators have tried to distill t

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Vogler, Ralf. "Ruling on Conditions of Carriage by the Federal Court of Justice." Air and Space Law 35, Issue 6 (2010): 423–31. http://dx.doi.org/10.54648/aila2010046.

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Almost every airline utilizes conditions of carriage clauses to penalize passengers in case of an insequential use of flight coupons. Usually, those clauses lead to an immediate expiration of the whole ticket. Instances of insequential use of flight coupons can happen in various ways. In most cases, the customer is either involved in a cross-ticketing or a cross-border-ticketing scenario. In Germany, clauses used in the conditions of carriage are subject to a review according to the rules of review for general terms and conditions as per the German Civil Code (sections 305 to 310). With its fi

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Lopes, Carolina De Castro, Frances Fischberg Blank, Antonio Marcio Tavares Thomé, and Davi Michel Valladão. "Investment decisions in an oil refinery in Brazil under a real option approach." Brazilian Journal of Operations & Production Management 16, no. 3 (2019): 375–86. http://dx.doi.org/10.14488/bjopm.2019.v16.n3.a2.

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Goal: The objective of this article is twofold: (i) analyze the investment in a new refinery in Brazil and identify the optimal moment to invest; and (ii) model the crack spread adjusted to the Brazilian market. Design / Methodology / Approach: The main uncertainties given by the crack spread and the foreign exchange rate were modeled as a continuous mean reversion model and geometric Brownian motion, respectively. The project was valued based on a real-option approach, including the option to postpone and the option to temporarily shut down. The first was assessed from analytical soluti

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Martinkute-Kauliene, Raimonda. "Sensitivity of Option Contracts." Business: Theory and Practice 14, no. (2) (2013): 157–65. https://doi.org/10.3846/btp.2013.17.

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There are plenty of reasons why investors use option contracts in their portfolios. The main reason for using such contracts or their strategies is to hedge against risk concerned with the uncertainty of underlying asset price movements. The identification of risk factors and their management is essential for all kinds of business. However, the process of risk assessment and management is especially important in the case of using complex activities such as option contracts. Options have characteristics that may make them less attractive for some investors. Options can be risky but provide oppo

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Bakshi, Gurdip, Xiaohui Gao, and Zhaowei Zhang. "What Insights Do Short-Maturity (7DTE) Return Predictive Regressions Offer about Risk Preferences in the Oil Market?" Commodities 3, no. 2 (2024): 225–47. http://dx.doi.org/10.3390/commodities3020014.

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In this study, we investigate the ability of three higher-order risk-neutral return cumulants to predict short maturity (weekly) returns of oil futures. Our data includes weekly West Texas Crude Oil futures options that expire in 7 days (7DTE). Using a model-free approach, we estimate these risk-neutral return cumulants at the beginning of each options expiration cycle. Our results suggest that the third risk-neutral return cumulant consistently predicts the returns of various oil futures (including WTI, Brent, Dubai, Heating Oil, and RBOB Gasoline). We compare our findings with 14 other predi

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