7 papers
Innovative Extensions to Option Pricing: Asymmetric Brownian Motion and Random Walk Approaches
Jagdish Gnawali, Abootaleb Shirvani, Dilmi C. W. Hettiachchi-Halpe-Kankanamalage +3
Classical option pricing models, such as Bachelier and Black--Scholes--Merton, postulate symmetric Brownian diffusion, which limits their capacity to reflect empirical phenomena in…
An Axiomatic Risk-Reward Framework for Sustainable Investing
Gabriele Torri, Rosella Giacometti, Darinka Dentcheva +2
Continued interest in sustainable investing calls for an axiomatic approach to measures of risk and reward that focus not only on financial returns, but also on measures of environ…
Option-Implied Zero-Coupon Yields: Unifying Bond and Equity Markets
Ting-Jung Lee, W. Brent Lindquist, Svetlozar T. Rachev +1
This paper addresses a critical inconsistency in models of the term structure of interest rates (TSIR), where zero-coupon bonds are priced under risk-neutral measures distinct from…
Evaluating Factor Contributions for Sold Homes
Jason R. Bailey, W. Brent Lindquist, Svetlozar T. Rachev
We evaluate the contributions of ten intrinsic and extrinsic factors, including ESG (environmental, social, and governance) factors readily available from website data to individua…
Asset Pricing in the Presence of Market Microstructure Noise
Peter Yegon, W. Brent Lindquist, Svetlozar T. Rachev
We present two models for incorporating the total effect of market microstructure noise into dynamic pricing of assets and European options. The first model is developed under a Bl…
Path-dependent, ESG-valued, option pricing in the Bachelier-Black-Scholes-Merton model
Bhathiya Divelgama, Nancy Asare Nyarko, W. Brent Lindquist +2
We extend the application of the Cherny-Shiryaev-Yor invariance principle to a unified Bachelier-Black-Scholes-Merton (BBSM) dynamic pricing model. This extension incorporates the…