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
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Peter Carr & Robert Jarrow & Ravi Myneni, 1992.
"Alternative Characterizations Of American Put Options,"
Wiley Blackwell, vol. 2(2), pages 87-106.
- Peter Carr & Robert Jarrow & Ravi Myneni, 2008. "Alternative Characterizations Of American Put Options," World Scientific Book Chapters, in: Financial Derivatives Pricing Selected Works of Robert Jarrow, chapter 5, pages 85-103 World Scientific Publishing Co. Pte. Ltd..
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"Option pricing when underlying stock returns are discontinuous,"
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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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- Peter Ritchken & Rob Trevor, 1999. "Pricing Options under Generalized GARCH and Stochastic Volatility Processes," Journal of Finance, American Finance Association, vol. 54(1), pages 377-402, 02.
- 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.
- 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 443-455, June.
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