Pricing of Arithmetic Asian Options under Stochastic Volatility Dynamics: Overcoming the Risks of High-Frequency Trading

Hsu, Chih-Chen; Lin, Chin-Teng; Kuo, Tsung-Jung

doi:10.3390/math8122251

Cited by 2 publications

(2 citation statements)

References 34 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Ref. [16] integrated Taylor-series expansions for deriving approximate analytical solutions for arithmetic Asian options.…”

Section: Pricing Asian Optionsmentioning

confidence: 99%

Innovating and Pricing Carbon-Offset Options of Asian Styles on the Basis of Jump Diffusions and Fractal Brownian Motions

Qi,

Wang

2023

Mathematics

View full text Add to dashboard Cite

Due to CO2 emissions, humans are encountering grave environmental crises (e.g., rising sea levels and the grim future of submerged cities). Governments have begun to offset emissions by constructing emission-trading schemes (carbon-offset markets). Investors naturally crave carbon-offset options to effectively control risk. However, the research and practice for these options are relatively limited. This paper contributes to the literature in this area. Specifically, according to carbon-emission allowances’ empirical distributions, we implement fractal Brownian motions and jump diffusions instead of traditional geometric Brownian motions. We contribute to extending the theoretical model based on carbon-offset option-pricing methods. We innovate the carbon-offset options of Asian styles. We authenticate the options’ stochastic differential equations and analytically price the options in the form of theorems. We verify the parameter sensitivity of pricing formulas by illustrations. We also elucidate the practical implications of an emission-trading scheme.

show abstract

“…Ref. [16] integrated Taylor-series expansions for deriving approximate analytical solutions for arithmetic Asian options.…”

Section: Pricing Asian Optionsmentioning

confidence: 99%

Innovating and Pricing Carbon-Offset Options of Asian Styles on the Basis of Jump Diffusions and Fractal Brownian Motions

Qi,

Wang

2023

Mathematics

View full text Add to dashboard Cite

show abstract

“…Freight options are a special kind of Asian-options. A large volume of literature is devoted to Asian/Bermudan options where different approaches are considered to approximate its value, see a detailed literature survey on [29] or more recent approaches such as [27,30] or [31].…”

Section: Partial Integro-differential Equation For Pricing Freight Optionsmentioning

confidence: 99%

Including Jumps in the Stochastic Valuation of Freight Derivatives

Gómez-Valle

Martínez-Rodríguez

2021

Mathematics

View full text Add to dashboard Cite

The spot freight rate processes considered in the literature for pricing forward freight agreements (FFA) and freight options usually have a particular dynamics in order to obtain the prices. In those cases, the FFA prices are explicitly obtained. However, for jump-diffusion models, an exact solution is not known for the freight options (Asian-type), in part due to the absence of a suitable valuation framework. In this paper, we consider a general jump-diffusion process to describe the spot freight dynamics and we obtain exact solutions of FFA prices for two parametric models. Moreover, we develop a partial integro-differential equation (PIDE), for pricing freight options for a general unifactorial jump-diffusion model. When we consider that the spot freight follows a geometric process with jumps, we obtain a solution of the freight option price in a part of its domain. Finally, we show the effect of the jumps in the FFA prices by means of numerical simulations.

show abstract

Pricing of Arithmetic Asian Options under Stochastic Volatility Dynamics: Overcoming the Risks of High-Frequency Trading

Cited by 2 publications

References 34 publications

Innovating and Pricing Carbon-Offset Options of Asian Styles on the Basis of Jump Diffusions and Fractal Brownian Motions

Innovating and Pricing Carbon-Offset Options of Asian Styles on the Basis of Jump Diffusions and Fractal Brownian Motions

Including Jumps in the Stochastic Valuation of Freight Derivatives

Contact Info

Product

Resources

About