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Df Structure Models For Options Pricing

  • Feng Dai

    (Zhengzhou Information Engineering University)

  • Zifu Qin

    (Zhengzhou Information Engineering University)

Registered author(s):

Based on the Partial Distribution[16], [17], 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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File URL: http://128.118.178.162/eps/fin/papers/0403/0403005.pdf
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Paper provided by EconWPA in its series Finance with number 0403005.

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Length: 12 pages
Date of creation: 24 Mar 2004
Date of revision:
Handle: RePEc:wpa:wuwpfi:0403005
Note: Type of Document - pdf; pages: 12
Contact details of provider: Web page: http://128.118.178.162

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  1. Peter Carr & Robert Jarrow & Ravi Myneni, 1992. "Alternative Characterizations Of American Put Options," Mathematical Finance, Wiley Blackwell, vol. 2(2), pages 87-106.
  2. Salvatore Micciche` & Giovanni Bonanno & Fabrizio Lillo & Rosario N. Mantegna, 2002. "Volatility in Financial Markets: Stochastic Models and Empirical Results," Papers cond-mat/0202527, arXiv.org.
  3. 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.
  4. 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.
  5. 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 637-54, May-June.
  6. 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.
  7. 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.
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