Factor Models for Option Pricing
AbstractOptions on stocks are priced using information on index options and viewing stocks in a factor model as indirectly holding index risk. The method is particularly suited to developing quotations on stock options when these markets are relatively illiquid and one has a liquid index options market to judge the index risk. The pricing strategy is illustrated on IBM and Sony options viewed as holding SPX and Nikkei risk respectively. Copyright Springer Science+Business Media, LLC. 2012
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Bibliographic InfoArticle provided by Springer in its journal Asia-Pacific Financial Markets.
Volume (Year): 19 (2012)
Issue (Month): 4 (November)
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Web page: http://springerlink.metapress.com/link.asp?id=102851
Variance gamma; Characteristic functions; Index options;
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