DF Structure Models for Options Pricing
Based on the Partial Distribution, we presents the concepts and expressions of DF process and DF structure and put forward the DF structure models of pricing options on a non-dividend-paying underlying for the first time. The DF structure models are able to price the call and put options exercised at any time, so it is applicable to pricing the American and European options. Finally, examples are given to compare the options priced by DF formulas and by Black-Scholes formulas, they show, as a whole, that the DF prices of options are closer to the trading prices than Black-Scholes prices in many cases.
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Volume (Year): IV (2005)
Issue (Month): 6 (November)
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References listed on IDEAS
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- Salvatore Micciche` & Giovanni Bonanno & Fabrizio Lillo & Rosario N. Mantegna, 2002.
"Volatility in Financial Markets: Stochastic Models and Empirical Results,"
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- Barone-Adesi, Giovanni & Whaley, Robert E, 1987. " Efficient Analytic Approximation of American Option Values," Journal of Finance, American Finance Association, vol. 42(2), pages 301-20, June.
- Geske, Robert & Roll, Richard, 1984. " On Valuing American Call Options with the Black-Scholes European Formula," Journal of Finance, American Finance Association, vol. 39(2), pages 443-55, June.
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