5 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…
Implied Probabilities and Volatility in Credit Risk: A Merton-Based Approach with Binomial Trees
Jagdish Gnawali, Abootaleb Shirvani, Svetlozar T. Rachev
We explore credit risk pricing by modeling equity as a call option and debt as the difference between the firm's asset value and a put option, following the structural framework of…
Hedging via Perpetual Derivatives: Trinomial Option Pricing and Implied Parameter Surface Analysis
Jagdish Gnawali, W. Brent Lindquist, Svetlozar T. Rachev
We introduce a fairly general, recombining trinomial tree model in the natural world. Market-completeness is ensured by considering a market consisting of two risky assets, a riskl…
Dynamic Asset Pricing in a Unified Bachelier-Black-Scholes-Merton Model
W. Brent Lindquist, Svetlozar T. Rachev, Jagdish Gnawali +1
We present a unified, market-complete model that integrates both the Bachelier and Black-Scholes-Merton frameworks for asset pricing. The model allows for the study, within a unifi…
Exploring Dynamic Asset Pricing within Bachelier Market Model
Nancy Asare Nyarko, Bhathiya Divelgama, Jagdish Gnawali +3
This paper delves into the dynamics of asset pricing within Bachelier market model, elucidating the representation of risky asset price dynamics and the definition of riskless asse…