The Structure Models for Futures Options Pricing and Related Researches
Based on the structure model of option pricing (Dai and Qin, 2005) and partial distribution (Dai, 2001), this paper designs a new kind of expression of futures price. It presents the structure pricing model for American futures options on underlying non-dividend-paying stocks, and provides three put-call parities between American call and put option on spots, call and put option on futures, and spot options and futures options. These are different from the current put-call parity on European options.The paper also proves analytically that an American call option on futures must be worth more than the corresponding American call option on spot and an American put option on futures must be worth less than the corresponding American put option on spot in a normal market; and the opposite holds true in an inverted market.
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Volume (Year): VII (2008)
Issue (Month): 3 (May)
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- DAI & Feng QIN & Zifu, 2005.
"DF Structure Models for Options Pricing,"
The IUP Journal of Applied Economics,
IUP Publications, vol. 0(6), pages 61-77, November.
- Miltersen, Kristian R. & Schwartz, Eduardo S., 1998. "Pricing of Options on Commodity Futures with Stochastic Term Structures of Convenience Yields and Interest Rates," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 33(01), pages 33-59, March.
- 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.
- 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.
- 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. Full references (including those not matched with items on IDEAS)
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