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Journal articles on the topic 'Options (Finance) Optioner'

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Published: 4 June 2021
Last updated: 1 February 2022

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1

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 (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 f
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2

BRANGER, NICOLE, and CHRISTIAN SCHLAG. "OPTION BETAS: RISK MEASURES FOR OPTIONS." International Journal of Theoretical and Applied Finance 10, no. 07 (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 comput
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3

Mo, Di, Neda Todorova, and Rakesh Gupta. "Implied volatility smirk and future stock returns: evidence from the German market." Managerial Finance 41, no. 12 (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 adjus
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4

Ciurlia, Pierangelo, and Andrea Gheno. "Pricing and Applications of Digital Installment Options." Journal of Applied Mathematics 2012 (2012): 1–21. http://dx.doi.org/10.1155/2012/584705.

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For its theoretical interest and strong impact on financial markets, option valuation is considered one of the cornerstones of contemporary mathematical finance. This paper specifically studies the valuation of exotic options with digital payoff and flexible payment plan. By means of the Incomplete Fourier Transform, the pricing problem is solved in order to find integral representations of the upfront price for European call and put options. Several applications in the areas of corporate finance, insurance, and real options are discussed. Finally, a new type of digital derivative named superc
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Lange, Rutger-Jan, Daniel Ralph, and Kristian Støre. "Real-Option Valuation in Multiple Dimensions Using Poisson Optional Stopping Times." Journal of Financial and Quantitative Analysis 55, no. 2 (2019): 653–77. http://dx.doi.org/10.1017/s0022109019000048.

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We provide a new framework for valuing multidimensional real options where opportunities to exercise the option are generated by an exogenous Poisson process, which can be viewed as a liquidity constraint on decision times. This approach, which we call the Poisson optional stopping times (POST) method, finds the value function as a monotone sequence of lower bounds. In a case study, we demonstrate that the frequently used quasi-analytic method yields a suboptimal policy and an inaccurate value function. The proposed method is demonstrably correct, straightforward to implement, reliable in comp
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6

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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7

CHANG, Kuo-Ping. "On Option Greeks and Corporate Finance." Journal of Advanced Studies in Finance 11, no. 2 (2020): 183. http://dx.doi.org/10.14505//jasf.v11.2(22).09.

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This paper has proposed new option Greeks and new upper and lower bounds for European and American options. It shows that because of the put-call parity, the Greeks of put and call options are interconnected and should be shown simultaneously. In terms of the theory of the firm, it is found that both the Black-Scholes-Merton and the binomial option pricing models implicitly assume that maximizing the market value of the firm is not equivalent to maximizing the equityholders’ wealth. The binomial option pricing model implicitly assumes that further increasing (decreasing) the promised payment t
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8

LIU, YU-HONG. "VALUATION OF COMPOUND OPTION WHEN THE UNDERLYING ASSET IS NON-TRADABLE." International Journal of Theoretical and Applied Finance 13, no. 03 (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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Huang, Han Ching, and Pei-Shan Tung. "The effects of liquidity trading on insider trade timing when an underlying option is present." Managerial Finance 44, no. 10 (2018): 1250–70. http://dx.doi.org/10.1108/mf-02-2018-0084.

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Purpose The purpose of this paper is to examine whether the underlying option impacts an insider’s propensity to purchase and sell before corporate announcements, the proportion of insiders’ trading after announcements relative to before announcements, and the insider’s profitability around corporate announcements. Design/methodology/approach The authors test whether the timing information and option have impacted on the tendency of insider trade, the percentage of all shares traded by insiders in the post-announcement to pre-announcement periods and the average cumulative abnormal stock retur
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10

LAU, KA WO, and YUE KUEN KWOK. "VALUATION OF EMPLOYEE RELOAD OPTIONS USING UTILITY MAXIMIZATION APPROACH." International Journal of Theoretical and Applied Finance 08, no. 05 (2005): 659–74. http://dx.doi.org/10.1142/s0219024905003189.

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The reload provision in an employee stock option is an option enhancement that allows the employee to pay the strike upon exercising the stock option using his owned stocks and to receive new "reload" stock options. The usual Black–Scholes risk neutral valuation approach may not be appropriate to be adopted as the pricing vehicle for employee stock options, due to the non-transferability of the ownership of the options and the restriction on short selling of the firm's stocks as hedging strategy. In this paper, we present a general utility maximization framework to price non-tradeable employee
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11

Lambrecht, Bart M., and Grzegorz Pawlina. "Corporate Finance and the (In)efficient Exercise of Real Options." Multinational Finance Journal 14, no. 3/4 (2010): 189–217. http://dx.doi.org/10.17578/14-3/4-2.

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12

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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13

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 (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-num
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14

Efendi, Jap, Li-Chin Jennifer Ho, Jeffrey J. Tsay, and Yu Zhang. "Stock option expense management after SFAS 123R." Review of Accounting and Finance 13, no. 3 (2014): 210–31. http://dx.doi.org/10.1108/raf-05-2012-0049.

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Purpose – The purpose of this paper is to examine whether firms manage the total value of stock option grants downward after the implementation of Statement of Financial Accounting Standards (SFAS) 123R to reduce their reported option expenses. Design/methodology/approach – All Standard & Poor’s (S&P) 1500 firms with available stock option data in 2004 and 2006 are included in the analysis. The authors analyze if the total value of options granted, the per share fair value of options granted, the number of options granted as well as each individual input assumption have changed from th
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15

Behera, Prashanta kumar, and Dr Ramraj T. Nadar. "Dynamic Approach for Index Option Pricing Using Different Models." Journal of Global Economy 13, no. 2 (2017): 105–20. http://dx.doi.org/10.1956/jge.v13i2.460.

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Option pricing is one of the exigent and elementary problems of computational finance. Our aims to determine the nifty index option price through different valuation technique. In this paper, we illustrate the techniques for pricing of options and extracting information from option prices. We also describe various ways in which this information has been used in a number of applications. When dealing with options, we inevitably encounter the Black-Scholes-Merton option pricing formula, which has revolutionized the way in which options are priced in modern time. Black and Scholes (1973) and Mer
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16

Vahdatmanesh, Mohammad, and Afshin Firouzi. "Price risk management in BOT railroad construction projects using financial derivatives." Journal of Financial Management of Property and Construction 23, no. 3 (2018): 349–62. http://dx.doi.org/10.1108/jfmpc-04-2018-0021.

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Purpose Railroad transit infrastructures are amongst major capital-intensive projects worldwide, which impose significant risks to the contractors of build-operate-transfer projects because of the fluctuations in steel price fluctuation. The purpose of this paper is to introduce a methodology for hedging steel price risk using financial derivatives. Design/methodology/approach Cox–Ross valuation lattice has been used as an option valuation model for determining option’s price for the construction companies involved in fixed-price railroad projects. A sensitivity analysis has been conducted usi
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17

Gerber, Hans U., and Elias S. W. Shiu. "Martingale Approach to Pricing Perpetual American Options." ASTIN Bulletin 24, no. 2 (1994): 195–220. http://dx.doi.org/10.2143/ast.24.2.2005065.

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AbstractThe method of Esscher transforms is a tool for valuing options on a stock, if the logarithm of the stock price is governed by a stochastic process with stationary and independent increments. The price of a derivative security is calculated as the expectation, with respect to the risk-neutral Esscher measure, of the discounted payoffs. Applying the optional sampling theorem we derive a simple, yet general formula for the price of a perpetual American put option on a stock whose downward movements are skip-free. Similarly, we obtain a formula for the price of a perpetual American call op
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18

Goncalves-Pinto, Luis, Bruce D. Grundy, Allaudeen Hameed, Thijs van der Heijden, and Yichao Zhu. "Why Do Option Prices Predict Stock Returns? The Role of Price Pressure in the Stock Market." Management Science 66, no. 9 (2020): 3903–26. http://dx.doi.org/10.1287/mnsc.2019.3398.

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Stock and options markets can disagree about a stock’s value because of informed trading in options and/or price pressure in the stock. The predictability of stock returns based on this cross-market discrepancy in values is especially strong when accompanied by stock price pressure, and it does not depend on trading in options. We argue that option-implied prices provide an anchor for fundamental stock values that helps to distinguish stock price movements resulting from pressure versus news. Overall, our results are consistent with stock price pressure being the primary driver of the option p
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19

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

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20

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 (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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21

DIA, BAYE M. "A REGULARIZED FOURIER TRANSFORM APPROACH FOR VALUING OPTIONS UNDER STOCHASTIC DIVIDEND YIELDS." International Journal of Theoretical and Applied Finance 13, no. 02 (2010): 211–40. http://dx.doi.org/10.1142/s0219024910005747.

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This paper studies the option pricing problem in a class of models in which dividend yields follow a time-homogeneous diffusion. Within this framework, we develop a new approach for valuing options based on the use of a regularized Fourier transform. We derive a pricing formula for European options which gives the option price in the form of an inverse Fourier transform and propose two methods for numerically implementing this formula. As an application of this pricing approach, we introduce the Ornstein-Uhlenbeck and the square-root dividend yield models in which we explicitly solve the prici
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22

Dorion, Christian. "Option Valuation with Macro-Finance Variables." Journal of Financial and Quantitative Analysis 51, no. 4 (2016): 1359–89. http://dx.doi.org/10.1017/s0022109016000442.

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I propose a model in which the price of an option is partly determined by macro-finance variables. In an application using an index of current business conditions, the new model outperforms existing benchmarks in fitting underlying asset returns and in pricing options. The model performs particularly well when business conditions are deteriorating. Using the recent financial crisis as an out-of-sample experiment, the new model has option-pricing errors that are 18% below those of a nested 2-component volatility benchmark. Results are robust to using alternative business conditions proxies and
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23

Pechtl, Andreas. "Some applications of occupation times of Brownian motion with drift in mathematical finance." Journal of Applied Mathematics and Decision Sciences 3, no. 1 (1999): 63–73. http://dx.doi.org/10.1155/s1173912699000048.

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In the last few years new types of path-dependent options called corridor options or range options have become well-known derivative instruments in European options markets. Since the payout profiles of those options are based on occupation times of the underlying security the purpose of this paper is to provide closed form pricing formulae of Black & Scholes type for some significant representatives. Alternatively we demonstrate in this paper a relatively simple derivation of the Black & Scholes price for a single corridor option – based on a static portfolio representation – which do
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STOIKOV, SASHA F. "PRICING OPTIONS FROM THE POINT OF VIEW OF A TRADER." International Journal of Theoretical and Applied Finance 09, no. 08 (2006): 1245–66. http://dx.doi.org/10.1142/s0219024906004049.

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This paper is a contribution to the pricing and hedging of options in a market where the volatility is stochastic. The new concept of relative indifference pricing is further developed. This relative price is the price at which an option trader is indifferent to trade in an additional option, given that he is currently holding and dynamically hedging a portfolio of options. We find that the appropriate volatility risk premium depends on the trader's risk aversion coefficient and his portfolio position before selling or buying the additional option. We suggest two asymptotic expansions which re
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Chen, Yi-Wen, Sheng-Syan Chen, and Robin K. Chou. "Short-Sale Constraints and Options Trading: Evidence from Reg SHO." Journal of Financial and Quantitative Analysis 55, no. 5 (2019): 1555–79. http://dx.doi.org/10.1017/s002210901900053x.

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We examine the effects of a temporary suspension of short-sale price tests on the options market. Consistent with the notion that put option trading substitutes for short selling, we find a significant reduction in put option volume. In addition, pressure on put option prices significantly declines, violations of the put-call parity become significantly less frequent, and option volume becomes less informed. Our findings add clarity to a long-standing debate on whether investors use options to circumvent equity short-selling restrictions.
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SHEVCHENKO, PAVEL V. "HOLDER-EXTENDIBLE EUROPEAN OPTION: CORRECTIONS AND EXTENSIONS." ANZIAM Journal 56, no. 4 (2015): 359–72. http://dx.doi.org/10.1017/s1446181115000097.

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Financial contracts with options that allow the holder to extend the contract maturity by paying an additional fixed amount have found many applications in finance. Closed-form solutions for the price of these options have appeared in the literature for the case when the contract for the underlying asset follows a geometric Brownian motion with constant interest rate, volatility and nonnegative dividend yield. In this paper, option price is derived for the case of the underlying asset that follows a geometric Brownian motion with time-dependent drift and volatility, which is more important for
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Ang, James S., Gwoduan David Jou, and Tsong-Yue Lai. "Alternative Formulas to Compute Implied Standard Deviation." Review of Pacific Basin Financial Markets and Policies 12, no. 02 (2009): 159–76. http://dx.doi.org/10.1142/s0219091509001599.

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We assume that the call option's value is correctly priced by Black and Scholes' option pricing model in this paper. This paper derives an exact closed-form solution for implied standard deviation under the condition that the underlying asset price equals the present value of the exercise price. The exact closed-form solution provides the true implied standard deviation and has no estimate error. This paper also develops three alternative formulas to estimate the implied standard deviation if this condition is violated. Application of the Taylor expansion on a single call option value derives
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Trainor, William, and Richard Gregory. "Leveraged ETF option strategies." Managerial Finance 42, no. 5 (2016): 438–48. http://dx.doi.org/10.1108/mf-12-2014-0305.

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Purpose – Leveraged exchange traded funds (ETFs) have become increasingly popular since their introduction in 2006. In recent years, options on leveraged ETFs have been promoted as a means of enhancing returns and reducing risk. The purpose of this paper is to examine the interchangeability of S & P 500 ETF options with leveraged S & P 500 ETF options and to what extent these options allow investors to manage their risk exposure. Design/methodology/approach – With increasing liquidity for these fund’s options, simple option strategies such as covered calls and protective puts can be im
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Tang, Han, and Wenfei Li. "Empirical study for uncertain finance." Journal of Intelligent & Fuzzy Systems 40, no. 5 (2021): 9485–92. http://dx.doi.org/10.3233/jifs-201955.

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Interest rate, stock and option are all important parts of finance. This paper applies uncertain differential equation to the study of the evolution of interest rate and stock price separately. Based on actual observations, we estimate the parameters in uncertain differential equation with the method of moments. Using the introduced interest rate and stock models, we price European options and compare the results with actual observations. Finally, a paradox of the stochastic financial model is stated.
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Lindensjö, Kristoffer. "The End of the Month Option and Other Embedded Options in Futures Contracts." Asia-Pacific Financial Markets 23, no. 1 (2016): 69–83. http://dx.doi.org/10.1007/s10690-016-9209-7.

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Herzog, Bodo, and Sufyan Osamah. "Reverse Engineering of Option Pricing: An AI Application." International Journal of Financial Studies 7, no. 4 (2019): 68. http://dx.doi.org/10.3390/ijfs7040068.

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This paper studies option pricing based on a reverse engineering (RE) approach. We utilize artificial intelligence in order to numerically compute the prices of options. The data consist of more than 5000 call- and put-options from the German stock market. First, we find that option pricing under reverse engineering obtains a smaller root mean square error to market prices. Second, we show that the reverse engineering model is reliant on training data. In general, the novel idea of reverse engineering is a rewarding direction for future research. It circumvents the limitations of finance theor
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Li, Shuang, Yanli Zhou, Xinfeng Ruan, and B. Wiwatanapataphee. "Pricing of American Put Option under a Jump Diffusion Process with Stochastic Volatility in an Incomplete Market." Abstract and Applied Analysis 2014 (2014): 1–8. http://dx.doi.org/10.1155/2014/236091.

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We study the pricing of American options in an incomplete market in which the dynamics of the underlying risky asset is driven by a jump diffusion process with stochastic volatility. By employing a risk-minimization criterion, we obtain the Radon-Nikodym derivative for the minimal martingale measure and consequently a linear complementarity problem (LCP) for American option price. An iterative method is then established to solve the LCP problem for American put option price. Our numerical results show that the model and numerical scheme are robust in capturing the feature of incomplete finance
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McKeon, Ryan. "Empirical patterns of time value decay in options." China Finance Review International 7, no. 4 (2017): 429–49. http://dx.doi.org/10.1108/cfri-09-2016-0108.

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Purpose The purpose of this paper is to conduct an empirical analysis of the pattern of time value decay in listed equity options, considering both call and put options and different moneyness and maturity levels. Design/methodology/approach The research design is empirical, with great attention paid to creating a standardized measure of time value that can be both tracked over time for an individual option contract and meaningfully compared across two or more different option contracts. Findings The author finds that moneyness classification at the beginning of the holding period is the key d
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GIANNETTI, ANTOINE, RUI ZHONG, and LIXIN WU. "INVENTORY HEDGING AND OPTION MARKET MAKING." International Journal of Theoretical and Applied Finance 07, no. 07 (2004): 853–78. http://dx.doi.org/10.1142/s0219024904002670.

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In this paper, we develop an inventory-based approach to analyze the option market making activity. Indeed, we formulate and analytically solve the price-setting problem of a monopolistic option market maker facing exogenous public supply and demand first on a single exercise price (the "single option economy") and next on multiple exercise prices (the "multi-options economy"). While in the "single option economy" the familiar result that market maker inventory and price level are inversely related holds, the same is not necessarily true in the "multi-options economy". Additionally, we examine
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KING, ALAN J., MATTI KOIVU, and TEEMU PENNANEN. "CALIBRATED OPTION BOUNDS." International Journal of Theoretical and Applied Finance 08, no. 02 (2005): 141–59. http://dx.doi.org/10.1142/s0219024905002925.

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This paper proposes a numerical approach for computing bounds for the arbitrage-free prices of an option when some options are available for trading. Convex duality reveals a close relationship with recently proposed calibration techniques and implied trees. Our approach is intimately related to the uncertain volatility model of Avellaneda, Levy and Parás, but it is more general in that it is not based on any particular form of the asset price process and does not require the seller's price of an option to be a differentiable function of the cash-flows of the option. Numerical tests on S&P
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Tambingon, Desty A., Jullia Titaley, and Tohap Manurung. "Black-Scholes Model in Determining European Option Prices on Netflix,Inc." d'CARTESIAN 8, no. 2 (2019): 80. http://dx.doi.org/10.35799/dc.8.2.2019.23960.

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Research has been conducted to compare the prices of European option on the Yahoo Finance website with prices obtained from the Black-Scholes model (theoretical price). Data was taken on January 31, 2019 which included the daily share price of Netflix, Inc. (NFLX) on February 14, 2018 - January 31, 2019 to obtain volatility, and NFLX options data due on January 17, 2020. Options with prices lower than theoretical prices are said to be underpriced, so the decision taken is to buy the options. Whereas options with prices higher than theoretical prices are said to be overpriced, so it has to be r
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An, Yunbi, and Wulin Suo. "An Empirical Comparison of Option-Pricing Models in Hedging Exotic Options." Financial Management 38, no. 4 (2009): 889–914. http://dx.doi.org/10.1111/j.1755-053x.2009.01060.x.

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38

Aboody, David, Nicole Bastian Johnson, and Ron Kasznik. "Employee stock options and future firm performance: Evidence from option repricings." Journal of Accounting and Economics 50, no. 1 (2010): 74–92. http://dx.doi.org/10.1016/j.jacceco.2009.12.003.

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39

Heard, D. M., and S. J. Grenfell. "GROWTH, PROTECTION AND VALUE REALISATION USING DERIVATIVES." APPEA Journal 44, no. 1 (2004): 781. http://dx.doi.org/10.1071/aj03042.

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Oil and gas producers are familiar with the use of derivatives to hedge oil price risk.Beyond this, derivatives provide opportunities to enhance more general corporate finance activities.An example is raising finance for acquisitions or developments. When the maximum senior debt has been obtained, the choice between equity funding or other sources (such as subordinated debt) should also consider the up-front cash available from a structured derivative program—this may lower the overall cost of capital for the acquirer, and directly improve equity returns through lower dilution.A notable aspect
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MERINO, R., J. POSPÍŠIL, T. SOBOTKA, and J. VIVES. "DECOMPOSITION FORMULA FOR JUMP DIFFUSION MODELS." International Journal of Theoretical and Applied Finance 21, no. 08 (2018): 1850052. http://dx.doi.org/10.1142/s0219024918500528.

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In this paper, we derive a generic decomposition of the option pricing formula for models with finite activity jumps in the underlying asset price process (SVJ models). This is an extension of the well-known result by Alòs [(2012) A decomposition formula for option prices in the Heston model and applications to option pricing approximation, Finance and Stochastics 16 (3), 403–422, doi: https://doi.org/10.1007/s00780-012-0177-0 ] for Heston [(1993) A closed-form solution for options with stochastic volatility with applications to bond and currency options, The Review of Financial Studies 6 (2),
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41

Fehle, Frank. "Too many options? Theory and evidence on option exchange design." Journal of Futures Markets 26, no. 6 (2006): 533–70. http://dx.doi.org/10.1002/fut.20213.

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Arnold, Tom, and Richard Shockley. "Real Options Analysis and the Assumptions of Corporate Finance: A Non-Technical Review." Multinational Finance Journal 14, no. 1/2 (2010): 29–71. http://dx.doi.org/10.17578/14-1/2-2.

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43

Seamer, Michael, and Adrian Melia. "Remunerating non-executive directors with stock options: who is ignoring the regulator?" Accounting Research Journal 28, no. 3 (2015): 251–67. http://dx.doi.org/10.1108/arj-12-2013-0092.

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Purpose – This paper aims to investigate the incidence of remunerating Australian Securities Exchange (ASX)-listed non-executive directors (NEDs) with options and to determine whether companies that fail to adhere to NED remuneration recommendations share a common corporate governance profile. Despite corporate regulators condemning the practice of remunerating NEDs with stock options, there is a paucity of evidence regarding its prevalence in Australia. Design/methodology/approach – Focusing on ASX400 companies during 2008, a series of hypotheses relating NED stock option remuneration and cor
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44

Ibrahim, Siti Nur Iqmal, Adan Diaz-Hernandez, John G. O'Hara, and Nick Constantinou. "Pricing holder-extendable call options with mean-reverting stochastic volatility." ANZIAM Journal 61 (May 6, 2020): 382–97. http://dx.doi.org/10.21914/anziamj.v61i0.12090.

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Options with extendable features have many applications in finance and these provide the motivation for this study. The pricing of extendable options when the underlying asset follows a geometric Brownian motion with constant volatility has appeared in the literature. In this paper, we consider holder-extendable call options when the underlying asset follows a mean-reverting stochastic volatility. The option price is expressed in integral forms which have known closed-form characteristic functions. We price these options using a fast Fourier transform, a finite difference method and Monte Carl
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45

IBRAHIM, S. N. I., A. DÍAZ-HERNÁNDEZ, J. G. O’HARA, and N. CONSTANTINOU. "PRICING HOLDER-EXTENDABLE CALL OPTIONS WITH MEAN-REVERTING STOCHASTIC VOLATILITY." ANZIAM Journal 61, no. 4 (2019): 382–97. http://dx.doi.org/10.1017/s1446181119000142.

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Options with extendable features have many applications in finance and these provide the motivation for this study. The pricing of extendable options when the underlying asset follows a geometric Brownian motion with constant volatility has appeared in the literature. In this paper, we consider holder-extendable call options when the underlying asset follows a mean-reverting stochastic volatility. The option price is expressed in integral forms which have known closed-form characteristic functions. We price these options using a fast Fourier transform, a finite difference method and Monte Carl
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46

Ahlip, Rehez, Laurence A. F. Park, Ante Prodan, and Stephen Weissenhofer. "Forward start options under Heston affine jump-diffusions and stochastic interest rate." International Journal of Financial Engineering 08, no. 01 (2021): 2150005. http://dx.doi.org/10.1142/s2424786321500055.

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This paper presents a generalization of forward start options under jump diffusion framework of Duffie et al. [Duffie, D, J Pan and K Singleton (2000). Transform analysis and asset pricing for affine jump-diffusions, Econometrica 68, 1343–1376.]. We assume, in addition, the short-term rate is governed by the CIR dynamics introduced in Cox et al. [Cox, JC, JE Ingersoll and SA Ross (1985). A theory of term structure of interest rates, Econometrica 53, 385–408.]. The instantaneous volatilities are correlated with the dynamics of the stock price process, whereas the short-term rate is assumed to b
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47

Ibáñez, Alfredo, and Ioannis Paraskevopoulos. "The Sensitivity of American Options to Suboptimal Exercise Strategies." Journal of Financial and Quantitative Analysis 45, no. 6 (2010): 1563–90. http://dx.doi.org/10.1017/s002210901000058x.

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AbstractThe value of American options depends on the exercise policy followed by option holders. Market frictions, risk aversion, or a misspecified model, for example, can result in suboptimal behavior. We study the sensitivity of American options to suboptimal exercise strategies. We show that this measure is given by the Gamma of the American option at the optimal exercise boundary. More precisely, “ifBis the optimal exercise price, but exercise is eitherbrought forward whenordelayed untila priceB̃has been reached, the cost of suboptimal exercise is given by ½ ×Γ(B) × (B−B̃)2, whereΓ(B) deno
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48

Callaghan, Sandra Renfro, Chandra Subramaniam, and Stuart Youngblood. "Option repricing and executive retention – revisited." Review of Accounting and Finance 15, no. 4 (2016): 499–517. http://dx.doi.org/10.1108/raf-01-2016-0011.

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Purpose This paper aims to directly test the assertion by proponents of executive stock option repricing that repricing leads to increased management retention. Previous studies find either no effect or decreased retention following stock price repricing. This paper uses a more precise research design to re-examine the relationship between stock option retention and management retention. Design/methodology/approach The authors use an empirical methodology and construct a sample of 158 firms and 201 repricing events, and a control sample of 201 non-repricing firms. They then examine executive t
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Souder, David, and Philip Bromiley. "Timing for Dollars: How Option Exercisability Influences Resource Allocation." Journal of Management 43, no. 8 (2017): 2555–79. http://dx.doi.org/10.1177/0149206316680032.

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Stock options have been advocated to encourage managers to make long-run investments like R&D and capital expenditures (CAPX) that entail upfront costs with the potential to generate favorable long-term returns. However, the effect of options on managerial decisions depends on managerial beliefs about how the stock market reacts to firm behavior. If, consistent with empirical evidence, managers believe that stock prices increase in the short term from increased R&D, but not CAPX, then stock option exercisability—which dictates when managers can receive option payouts—should influence r
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50

JIANG, GEORGE J. "STOCHASTIC VOLATILITY AND JUMP-DIFFUSION — IMPLICATIONS ON OPTION PRICING." International Journal of Theoretical and Applied Finance 02, no. 04 (1999): 409–40. http://dx.doi.org/10.1142/s0219024999000212.

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This paper conducts a thorough and detailed investigation on the implications of stochastic volatility and random jump on option prices. Both stochastic volatility and jump-diffusion processes admit asymmetric and fat-tailed distribution of asset returns and thus have similar impact on option prices compared to the Black–Scholes model. While the dynamic properties of stochastic volatility model are shown to have more impact on long-term options, the random jump is shown to have relatively larger impact on short-term near-the-money options. The misspecification risk of stochastic volatility as
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