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Explicit pricing formulas for turbo warrants
Uppsala University, Teknisk-naturvetenskapliga vetenskapsområdet, Mathematics and Computer Science, Department of Mathematics.
(English)In: Risk magazine, ISSN 1082-6394Article in journal (Refereed) Submitted
URN: urn:nbn:se:uu:diva-94002OAI: oai:DiVA.org:uu-94002DiVA: diva2:167677
Available from: 2006-02-17 Created: 2006-02-17 Last updated: 2009-02-26Bibliographically approved
In thesis
1. On the pricing equations of some path-dependent options
Open this publication in new window or tab >>On the pricing equations of some path-dependent options
2006 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

This thesis consists of four papers and a summary. The common topic of the included papers are the pricing equations of path-dependent options. Various properties of barrier options and American options are studied, such as convexity of option prices, the size of the continuation region in American option pricing and pricing formulas for turbo warrants. In Paper I we study the effect of model misspecification on barrier option pricing. It turns out that, as in the case of ordinary European and American options, this is closely related to convexity properties of the option prices. We show that barrier option prices are convex under certain conditions on the contract function and on the relation between the risk-free rate of return and the dividend rate. In Paper II a new condition is given to ensure that the early exercise feature in American option pricing has a positive value. We give necessary and sufficient conditions for the American option price to coincide with the corresponding European option price in at least one diffusion model. In Paper III we study parabolic obstacle problems related to American option pricing and in particular the size of the non-coincidence set. The main result is that if the boundary of the set of points where the obstacle is a strict subsolution to the differential equation is C1-Dini in space and Lipschitz in time, there is a positive distance, which is uniform in space, between the boundary of this set and the boundary of the non-coincidence set. In Paper IV we derive explicit pricing formulas for turbo warrants under the classical Black-Scholes assumptions.

Place, publisher, year, edition, pages
Uppsala: Matematiska institutionen, 2006. vi+18 p.
Uppsala Dissertations in Mathematics, ISSN 1401-2049 ; 45
Mathematical analysis, Parabolic partial differential equations, variational inequalities, American options, barrier options, monotonicity in the volatility, turbo warrants, pricing formulas, Matematisk analys
National Category
Mathematical Analysis
urn:nbn:se:uu:diva-6329 (URN)91-506-1852-0 (ISBN)
Public defence
2006-03-17, MIC2247, Lägerhyddsvägen 2, SE-751 06, Uppsala, 13:15
Available from: 2006-02-17 Created: 2006-02-17Bibliographically approved

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