12 citations · 35 across the 18 of their papers we have counts for
21 papers
Market Complete Option Valuation using a Jarrow-Rudd Pricing Tree with Skewness and Kurtosis
Yuan Hu, Abootaleb Shirvani, W. Brent Lindquist +2
Applying the Cherny-Shiryaev-Yor invariance principle, we introduce a generalized Jarrow-Rudd (GJR) option pricing model with uncertainty driven by a skew random walk. The GJR pric…
Option Pricing Incorporating Factor Dynamics in Complete Markets
Yuan Hu, Abootaleb Shirvani, W. Brent Lindquist +2
Using the Donsker-Prokhorov invariance principle we extend the Kim-Stoyanov-Rachev-Fabozzi option pricing model to allow for variably-spaced trading instances, an important conside…
Option Pricing in Markets with Informed Traders
Yuan Hu, Abootaleb Shirvani, Stoyan Stoyanov +3
The objective of this paper is to introduce the theory of option pricing for markets with informed traders within the framework of dynamic asset pricing theory. We introduce new mo…
Rational Finance Approach to Behavioral Option Pricing
Jiexin Dai, Abootaleb Shirvani, Frank J. Fabozzi
When pricing options, there may be different views on the instantaneous mean return of the underlying price process. According to Black (1972), where there exist heterogeneous view…
Choosing the Right Return Distribution and the Excess Volatility Puzzle
Abootaleb Shirvani, Frank J. Fabozzi
Proponents of behavioral finance have identified several "puzzles" in the market that are inconsistent with rational finance theory. One such puzzle is the "excess volatility puzzl…
Option Pricing in an Investment Risk-Return Setting
Abootaleb Shirvani, Frank J. Fabozzi, Stoyan V. Stoyanov
In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can constr…
A Rational Finance Explanation of the Stock Predictability Puzzle
Abootaleb Shirvani, Svetlozar T. Rachev, Frank J. Fabozzi
In this paper, we address one of the main puzzles in finance observed in the stock market by proponents of behavioral finance: the stock predictability puzzle. We offer a statistic…
Option Pricing with Mixed Levy Subordinated Price Process and Implied Probability Weighting Function
Abootaleb Shirvani, Yuan Hu, Svetlozar T. Rachev +1
It is essential to incorporate the impact of investor behavior when modeling the dynamics of asset returns. In this paper, we reconcile behavioral finance and rational finance by i…
Equity Premium Puzzle or Faulty Economic Modelling?
Abootaleb Shirvani, Stoyan V. Stoyanov, Frank J. Fabozzi +1
In this paper, we revisit the equity premium puzzle reported in 1985 by Mehra and Prescott. We show that the large equity premium that they report can be explained by choosing a mo…
Modelling Crypto Asset Price Dynamics, Optimal Crypto Portfolio, and Crypto Option Valuation
Yuan Hu, Svetlozar T. Rachev, Frank J. Fabozzi
Despite being described as a medium of exchange, cryptocurrencies do not have the typical attributes of a medium of exchange. Consequently, cryptocurrencies are more appropriately…
Multiple Subordinated Modeling of Asset Returns
Abootaleb Shirvani, Svetlozar T. Rachev, Frank J. Fabozzi
Subordination is an often used stochastic process in modeling asset prices. Subordinated Levy price processes and local volatility price processes are now the main tools in modern…
Another Look at the Ho-Lee Bond Option Pricing Model
Young Shin Kim, Stoyan Stoyanov, Svetlozar Rachev +1
In this paper, we extend the classical Ho-Lee binomial term structure model to the case of time-dependent parameters and, as a result, resolve a drawback associated with the model.…
Enhancing Binomial and Trinomial Equity Option Pricing Models
Yong Shin Kim, Stoyan Stoyanov, Svetlozar Rachev +1
We extend the classical Cox-Ross-Rubinstein binomial model in two ways. We first develop a binomial model with time-dependent parameters that equate all moments of the pricing tree…
Option pricing for Informed Traders
Stoyan V. Stoyanov, Yong Shin Kim, Svetlozar T. Rachev +1
In this paper we extend the theory of option pricing to take into account and explain the empirical evidence for asset prices such as non-Gaussian returns, long-range dependence, v…
Behavioral Finance Option Pricing Formulas Consistent with Rational Dynamic Asset Pricing
Svetlozar Rachev, Stoyan Stoyanov, Frank J. Fabozzi
We derive behavioral finance option pricing formulas consistent with the rational dynamic asset pricing theory. In the existing behavioral finance option pricing formulas, the pric…
Behavioral Finance -- Asset Prices Predictability, Equity Premium Puzzle, Volatility Puzzle: The Rational Finance Approach
Svetlozar Rachev, Stoyan Stoyanov, Stefan Mittnik +2
In this paper we address three main objections of behavioral finance to the theory of rational finance, considered as anomalies the theory of rational finance cannot explain: Predi…
Pricing derivatives in Hermite markets
Stoyan V. Stoyanov, Svetlozar T. Rachev, Stefan Mittnik +1
We present a new framework for Hermite fractional financial markets, generalizing the fractional Brownian motion and fractional Rosenblatt markets. Considering pure and mixed Hermi…
Option Pricing with Greed and Fear Factor: The Rational Finance Approach
Svetlozar Rachev, Frank J. Fabozzi, Boryana Racheva-Iotova +1
We explain the main concepts of Prospect Theory and Cumulative Prospect Theory within the framework of rational dynamic asset pricing theory. We derive option pricing formulas when…
Pricing Derivatives in Hermite Markets
Svetlozar T. Rachev, Stefan Mittnik, Frank J. Fabozzi
We introduce Hermite fractional financial markets, where market uncertainties are described by multidimensional Hermite motions. Hermite markets include as particular cases financi…
Financial market with no riskless (safe) asset
Svetlozar Rachev, Frank Fabozzi
We study markets with no riskless (safe) asset. We derive the corresponding Black-Scholes-Merton option pricing equations for markets where there are only risky assets which have t…
Multi-Purpose Binomial Model: Fitting all Moments to the Underlying Geometric Brownian Motion
Y. S. Kim, S. Stoyanov, S. Rachev +1
We construct a binomial tree model fitting all moments to the approximated geometric Brownian motion. Our construction generalizes the classical Cox-Ross-Rubinstein, the Jarrow-Rud…