|
|
Digital
Library of the European Council for Modelling and Simulation |
|
Title: |
Options With Stochastic Strike Prices |
|
Authors: |
Janos Szaz, Agnes Vidovics-Dancs |
|
Published in:
|
(2018). ECMS 2018
Proceedings Edited by: Lars Nolle, Alexandra
Burger, Christoph Tholen,
Jens Werner, Jens Wellhausen European Council for
Modeling and Simulation. doi:
10.7148/2018-0005 ISSN:
2522-2422 (ONLINE) ISSN:
2522-2414 (PRINT) ISSN:
2522-2430 (CD-ROM) 32nd European Conference on Modelling and Simulation, Wilhelmshaven, Germany, May 22nd
– May 265h, 2018 |
|
Citation
format: |
Janos
Szaz, Agnes Vidovics-Dancs
(2018). Options With Stochastic Strike Prices, ECMS
2018 Proceedings Edited by: Lars Nolle, Alexandra
Burger, Christoph Tholen,
Jens Werner, Jens Wellhausen European Council for
Modeling and Simulation. doi:
10.7148/2018-0041 |
|
DOI: |
https://doi.org/10.7148/2018-0041 |
|
Abstract: |
In the option pricing theory, the
exercise price is constant by definition. The early generalizations of the
Black-Scholes formula aimed to get rid of the
constant nature of some parameters (the risk-free interest rate or the
volatility). The focus of this paper is on generalizing the basic option
pricing techniques in another direction: by allowing the strike price to be a
random variable or change across time. For this purpose, we will examine a
European call option with binomial random strike price and an American put
option with time- and state-varying strike price. Taking the exercise price
as a random variable might be considered as a bridge between the Balck-Scholes and the Margrabe-model. |
|
Full
text: |
|
