Market-Conform Valuation of Options (Lecture Notes in Economics and Mathematical Systems)
By admin • Oct 18th, 2008 • Category: Economics
Market-Conform Valuation of Options (Lecture Notes in Economics and Mathematical Systems)
Market-Conform Valuation of Options (Lecture Notes in Economics and Mathematical Systems)
By Tobias Herwig
Publisher: Springer
Number Of Pages: 104
Publication Date: 2006-02-27
ISBN-10 / ASIN: 3540308377
ISBN-13 / EAN: 9783540308379
Binding: Paperback
The focus of this volume is on the development of new approaches for the market-conform valuation of newly issued derivatives. The first chapter presents a flexible approach to construct the binomial process of the underlying asset price by using a simultaneously backward and forward induction algorithm. This framework can be used to price and hedge a wide range of plain-vanilla and exotic options. In the second chapter this new approach is compared to existing models using a sample of plain-vanilla options, American call options and European Barrier options from two competing markets. In the third chapter new methods to value American-style options via Monte Carlo simulations in accordance with given market prices are discussed. After a short introduction to Monte Carlo methods, two new approaches are proposed. These new frameworks are illustrated via pricing examples for standard American put options.
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