A master equation approach to option pricing
Author
Abstract
Suggested Citation
DOI: 10.1016/S0378-4371(02)01530-3
Download full text from publisher
As the access to this document is restricted, you may want to search for a different version of it.
References listed on IDEAS
- Longstaff, Francis A & Schwartz, Eduardo S, 2001. "Valuing American Options by Simulation: A Simple Least-Squares Approach," The Review of Financial Studies, Society for Financial Studies, vol. 14(1), pages 113-147.
- Boyle, Phelim & Broadie, Mark & Glasserman, Paul, 1997. "Monte Carlo methods for security pricing," Journal of Economic Dynamics and Control, Elsevier, vol. 21(8-9), pages 1267-1321, June.
- Cox, John C. & Ross, Stephen A., 1976. "The valuation of options for alternative stochastic processes," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 145-166.
- Merton, Robert C., 1976.
"Option pricing when underlying stock returns are discontinuous,"
Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 125-144.
- Merton, Robert C., 1975. "Option pricing when underlying stock returns are discontinuous," Working papers 787-75., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
- Scott, Louis O., 1987. "Option Pricing when the Variance Changes Randomly: Theory, Estimation, and an Application," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(4), pages 419-438, December.
- Hull, John C & White, Alan D, 1987. "The Pricing of Options on Assets with Stochastic Volatilities," Journal of Finance, American Finance Association, vol. 42(2), pages 281-300, June.
- Boyle, Phelim P., 1977. "Options: A Monte Carlo approach," Journal of Financial Economics, Elsevier, vol. 4(3), pages 323-338, May.
- Longstaff, Francis A & Schwartz, Eduardo S, 2001. "Valuing American Options by Simulation: A Simple Least-Squares Approach," University of California at Los Angeles, Anderson Graduate School of Management qt43n1k4jb, Anderson Graduate School of Management, UCLA.
Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
Cited by:
- Jaekel, Uwe, 2005. "Pricing of American style options with an adjoint process correction method," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 352(2), pages 584-600.
Most related items
These are the items that most often cite the same works as this one and are cited by the same works as this one.- Lim, Terence & Lo, Andrew W. & Merton, Robert C. & Scholes, Myron S., 2006. "The Derivatives Sourcebook," Foundations and Trends(R) in Finance, now publishers, vol. 1(5–6), pages 365-572, April.
- Michael A. Kouritzin, 2018. "Explicit Heston Solutions And Stochastic Approximation For Path-Dependent Option Pricing," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 21(01), pages 1-45, February.
- Michael A. Kouritzin, 2016. "Explicit Heston Solutions and Stochastic Approximation for Path-dependent Option Pricing," Papers 1608.02028, arXiv.org, revised Apr 2018.
- Chuang-Chang Chang & Jun-Biao Lin & Wei-Che Tsai & Yaw-Huei Wang, 2012. "Using Richardson extrapolation techniques to price American options with alternative stochastic processes," Review of Quantitative Finance and Accounting, Springer, vol. 39(3), pages 383-406, October.
- Mark Broadie & Jerome B. Detemple, 2004. "ANNIVERSARY ARTICLE: Option Pricing: Valuation Models and Applications," Management Science, INFORMS, vol. 50(9), pages 1145-1177, September.
- Lars Stentoft, 2008. "Option Pricing using Realized Volatility," CREATES Research Papers 2008-13, Department of Economics and Business Economics, Aarhus University.
- Stentoft, Lars, 2011.
"American option pricing with discrete and continuous time models: An empirical comparison,"
Journal of Empirical Finance, Elsevier, vol. 18(5), pages 880-902.
- Lars Stentoft, 2011. "American Option Pricing with Discrete and Continuous Time Models: An Empirical Comparison," CREATES Research Papers 2011-34, Department of Economics and Business Economics, Aarhus University.
- Katarzyna Toporek, 2012. "Simple is better. Empirical comparison of American option valuation methods," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 29.
- Rojas-Bernal, Alejandro & Villamizar-Villegas, Mauricio, 2021.
"Pricing the exotic: Path-dependent American options with stochastic barriers,"
Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 2(1).
- Alejandro Rojas-Bernal & Mauricio Villamizar-Villegas, 2021. "Pricing the exotic: Path-dependent American options with stochastic barriers," Borradores de Economia 1156, Banco de la Republica de Colombia.
- Ravi Kashyap, 2022. "Options as Silver Bullets: Valuation of Term Loans, Inventory Management, Emissions Trading and Insurance Risk Mitigation using Option Theory," Annals of Operations Research, Springer, vol. 315(2), pages 1175-1215, August.
- Chockalingam, Arun & Feng, Haolin, 2015. "The implication of missing the optimal-exercise time of an American option," European Journal of Operational Research, Elsevier, vol. 243(3), pages 883-896.
- Lars Stentoft, 2013. "American option pricing using simulation with an application to the GARCH model," Chapters, in: Adrian R. Bell & Chris Brooks & Marcel Prokopczuk (ed.), Handbook of Research Methods and Applications in Empirical Finance, chapter 5, pages 114-147, Edward Elgar Publishing.
- Cui, Zhenyu & Lars Kirkby, J. & Nguyen, Duy, 2019. "A general framework for time-changed Markov processes and applications," European Journal of Operational Research, Elsevier, vol. 273(2), pages 785-800.
- Philipp N. Baecker, 2007. "Real Options and Intellectual Property," Lecture Notes in Economics and Mathematical Systems, Springer, number 978-3-540-48264-2, October.
- Pringles, Rolando & Olsina, Fernando & Penizzotto, Franco, 2020. "Valuation of defer and relocation options in photovoltaic generation investments by a stochastic simulation-based method," Renewable Energy, Elsevier, vol. 151(C), pages 846-864.
- Cosma, Antonio & Galluccio, Stefano & Scaillet, Olivier, 2012.
"Valuing American options using fast recursive projections,"
Working Papers
unige:41856, University of Geneva, Geneva School of Economics and Management.
- Cosma, Antonio & Galluccio, Stefano & Pederzoli, Paola & Scaillet, Olivier, 2016. "Valuing American options using fast recursive projections," Working Papers unige:82087, University of Geneva, Geneva School of Economics and Management.
- Antonio Cosma & Stefano Galluccio & Paola Pederzoli & Olivier Scaillet, 2015. "Valuing American options using fast recursive projections," DEM Discussion Paper Series 15-20, Department of Economics at the University of Luxembourg.
- Antonio Cosma & Stefano Galluccio & Paola Pederzoli & O. Scaillet, 2012. "Valuing American Options Using Fast Recursive Projections," Swiss Finance Institute Research Paper Series 12-26, Swiss Finance Institute.
- Nelson Areal & Artur Rodrigues & Manuel Armada, 2008. "On improving the least squares Monte Carlo option valuation method," Review of Derivatives Research, Springer, vol. 11(1), pages 119-151, March.
- Georgievski, Alex & Masih, A. Mansur M., 2004. "An analysis of option pricing under systematic consumption risk using GARCH," Research in International Business and Finance, Elsevier, vol. 18(2), pages 151-171, June.
- Manuel Moreno & Javier Navas, 2003.
"On the Robustness of Least-Squares Monte Carlo (LSM) for Pricing American Derivatives,"
Review of Derivatives Research, Springer, vol. 6(2), pages 107-128, May.
- Manuel Moreno & Javier R. Navas, 2001. "On the robustness of least-squares Monte Carlo (LSM) for pricing American derivatives," Economics Working Papers 543, Department of Economics and Business, Universitat Pompeu Fabra.
- Kung, James J. & Lee, Lung-Sheng, 2009. "Option pricing under the Merton model of the short rate," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 80(2), pages 378-386.
More about this item
Keywords
Master equation; Black–Scholes equation; Monte-Carlo Methods; Piecewise deterministic processes;All these keywords.
Statistics
Access and download statisticsCorrections
All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:phsmap:v:319:y:2003:i:c:p:519-534. See general information about how to correct material in RePEc.
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/ .
Please note that corrections may take a couple of weeks to filter through the various RePEc services.