Collectively Fluctuating Assets in the Presence of Arbitrage Opportunities and Option Pricing

1999 ◽  
Author(s):  
Alexander N. Adamchuk ◽  
Sergei E. Esipov
Keyword(s):  
Option Pricing ◽  
Arbitrage Opportunities

scholarly journals D-brane solutions under market panic

2018 ◽  
Vol 15 (06) ◽  
pp. 1850099 ◽  
Author(s):  
Richard Pincak
Keyword(s):  
Option Pricing ◽  
Financial Market ◽  
Stock Prices ◽  
Stock Price ◽  
Parallel Transport ◽  
Brane World ◽  
Relativistic Quantum Mechanic ◽  
Riemann Curvature ◽  
Arbitrage Opportunities ◽  
Equilibrium Market

The relativistic quantum mechanic approach is used to develop stock market dynamics. The relativistic is conceptional here as the meaning of big external volatility or volatility shock on a financial market. We used a differential geometry approach with the parallel transport of prices to obtain a direct shift of the stock price movement. The prices are represented here as electrons with different spin orientation. Up and down orientations of the spin particle are likened here to an increase or a decrease of stock prices. The parallel transport of stock prices is enriched by Riemann curvature, which describes some arbitrage opportunities in the market. To solve the stock-price dynamics, we used the Dirac equation for bispinors on the spherical brane-world. We found out that when a spherical brane is abbreviated to the disk on the equator, we converge to the ideal behavior of financial market where Black–Scholes as well as semi-classical equations are sufficient. Full spherical brane-world scenarios can describe non-equilibrium market behavior where all arbitrage opportunities as well as transaction costs are taken into account. Real application of the model to the option pricing was done. The model developed in this paper brings quantitative different results of option pricing dynamics in the case of nonzero Riemann curvature.

Negative interest rates effects on option pricing: Back to basics?

2017 ◽  
Vol 04 (02n03) ◽  
pp. 1750034 ◽  
Author(s):  
Giacomo Burro ◽  
Pier Giuseppe Giribone ◽  
Simone Ligato ◽  
Martina Mulas ◽  
Francesca Querci
Keyword(s):  
Interest Rate ◽  
Option Pricing ◽  
Interest Rates ◽  
Normal Distribution ◽  
Interest Rate Options ◽  
No Arbitrage ◽  
Arbitrage Opportunities ◽  
Negative Interest Rates ◽  
Critical Issues ◽  
Log Normal

We provide the first formal investigation of the consequences of negative interest rates in the Eurozone on the pricing of interest rate options. Since the money market rates settled in negative territory and other market segments experienced negative yields, the broader financial community has had to face an unknown environment. The well-known Black–Scholes (BS) framework has become unfeasible for interest rate option valuation. First of all, no-arbitrage properties are breached, allowing arbitrage opportunities. More, the BS framework’s assumption of a log-normal distribution of the underlying rates does not stand with negative interest rates. We argue that the most notable approach which allows interest rate option pricing is [Bachelier, L (1900). Théorie de la speculation, 3rd Annales scientifiques de l’École Normale Supēérieure 17, 21–86.], which assumes a normal distribution of the underlying rates. We demonstrate that the Bachelier model represents an answer to the critical issues that are raised in our study. Still, we highlight that it is far from being an accurate pricing model. Our research aims to light up an intense debate about alternative solutions among academics, financial professionals and institutions, and policy makers.

On empirical likelihood option pricing

2017 ◽  
Vol 19 (5) ◽  
pp. 41-53
Author(s):  
Xiaolong Zhong ◽  
Jie Cao ◽  
Yong Jin ◽  
Wei Zheng
Keyword(s):  
Option Pricing ◽  
Empirical Likelihood

An analytical approximation for the GARCH option pricing model

1999 ◽  
Vol 2 (4) ◽  
pp. 75-116 ◽  
Author(s):  
Jin-Chuan Duan ◽  
Geneviève Gauthier ◽  
Jean-Guy Simonato
Keyword(s):  
Option Pricing ◽  
Analytical Approximation ◽  
Pricing Model ◽  
Option Pricing Model

Efficient conservative second-order central-upwind schemes for option-pricing problems

2019 ◽  
Vol 22 (5) ◽  
pp. 71-101 ◽  
Author(s):  
Omishwary Bhatoo ◽  
Arshad Ahmud Iqbal Peer ◽  
Eitan Tadmor ◽  
Desire Yannick Tangman ◽  
Aslam Aly El Faidal Saib
Keyword(s):  
Option Pricing ◽  
Second Order ◽  
Upwind Schemes ◽  
Pricing Problems
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