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- handle: 10670/1.pt092p
- halshs: halshs-01242610
- doi: 10.1016/j.jbankfin.2015.10.003
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info:eu-repo/semantics/altIdentifier/doi/10.1016/j.jbankfin.2015.10.003
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Mots-clés
American strangles early exercise boundaries Kim representation numerical integration greek parameters G - Financial Economics/G.G1 - General Financial Markets/G.G1.G12 - Asset Pricing • Trading Volume • Bond Interest Rates G - Financial Economics/G.G1 - General Financial Markets/G.G1.G13 - Contingent Pricing • Futures Pricing C - Mathematical and Quantitative Methods/C.C6 - Mathematical Methods • Programming Models • Mathematical and Simulation Modeling/C.C6.C61 - Optimization Techniques • Programming Models • Dynamic Analysis C - Mathematical and Quantitative Methods/C.C6 - Mathematical Methods • Programming Models • Mathematical and Simulation Modeling/C.C6.C65 - Miscellaneous Mathematical ToolsSujets proches
Price policy, Industrial Retail pricing Price policyCiter ce document
Souleymane Laminou Abdou et al., « Pricing and hedging American and hybrid strangles with finite maturity », HAL-SHS : droit et gestion, ID : 10.1016/j.jbankfin.2015.10.003
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Résumé
This paper introduces variants of strangles, called Euro-American or hybrid strangles, and it promotes a new numerical pricing technique. We highlight and compare the properties of European, American, and hybrid strangles with pricing and hedging in mind. The new quadrature approach we propose can account for systems of coupled integral equations that locate the early exercise boundaries of finite-lived contracts. We show that this method is efficient, accurate, and fast for pricing all types of early exercisable strangles. Other advantages of this technique are that it avoids the non-monotonic gradient problem faced by others and it allows users to control for errors. We then investigate the hedging of all strangles, we derive analytical expressions for some Greek parameters, and we stress how these parameters can differ (or not) from each other.