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Article: Effect of Institutional Deleveraging on Option Valuation Problems

TitleEffect of Institutional Deleveraging on Option Valuation Problems
Authors
YANG, QQChing, WKHE, WHSong, N
KeywordsOption Valuation
Fire Sales
Deleverage
Risk-Neutral Pricing
Endogenous Risk
Issue Date2021
PublisherAmerican Institute of Mathematical Sciences. The Journal's web site is located at https://www.aimsciences.org/journal/1547-5816
Citation
Journal of Industrial and Management Optimization, 2021, v. 17 n. 4, p. 2097-2118 How to Cite?
DOI: http://dx.doi.org/10.3934/jimo.2020060
AbstractThis paper studies the valuation problem of European call options when the presence of distressed selling may lead to further endogenous volatility and correlation between the stock issuer's asset value and the price of the stock underlying the option, and hence influence the option price. A change of numéraire technique, based on Girsanov Theorem, is applied to derive the analytical pricing formula for the European call option when the price of underlying stock is subject to price pressure triggered by the stock issuer's own distressed selling. Numerical experiments are also provided to study the impacts of distressed selling on the European call option prices.
Persistent Identifierhttp://hdl.handle.net/10722/300592
ISSN
1547-5816
2021 Impact Factor: 1.411
2020 SCImago Journal Rankings: 0.325
ISI Accession Number ID
WOS:000634690500027

 

DC FieldValueLanguage
dc.contributor.authorYANG, QQ-
dc.contributor.authorChing, WK-
dc.contributor.authorHE, WH-
dc.contributor.authorSong, N-
dc.date.accessioned2021-06-18T14:54:13Z-
dc.date.available2021-06-18T14:54:13Z-
dc.date.issued2021-
dc.identifier.citationJournal of Industrial and Management Optimization, 2021, v. 17 n. 4, p. 2097-2118-
dc.identifier.issn1547-5816-
dc.identifier.urihttp://hdl.handle.net/10722/300592-
dc.description.abstractThis paper studies the valuation problem of European call options when the presence of distressed selling may lead to further endogenous volatility and correlation between the stock issuer's asset value and the price of the stock underlying the option, and hence influence the option price. A change of numéraire technique, based on Girsanov Theorem, is applied to derive the analytical pricing formula for the European call option when the price of underlying stock is subject to price pressure triggered by the stock issuer's own distressed selling. Numerical experiments are also provided to study the impacts of distressed selling on the European call option prices.-
dc.languageeng-
dc.publisherAmerican Institute of Mathematical Sciences. The Journal's web site is located at https://www.aimsciences.org/journal/1547-5816-
dc.relation.ispartofJournal of Industrial and Management Optimization-
dc.rightsJournal of Industrial and Management Optimization. Copyright © American Institute of Mathematical Sciences.-
dc.rightsThis is a pre-copy-editing, author-produced PDF of an article accepted for publication in [insert journal title] following peer review. The definitive publisher-authenticated version [insert complete citation information here] is available online at: xxxxxxx [insert URL that the author will receive upon publication here].-
dc.subjectOption Valuation-
dc.subjectFire Sales-
dc.subjectDeleverage-
dc.subjectRisk-Neutral Pricing-
dc.subjectEndogenous Risk-
dc.titleEffect of Institutional Deleveraging on Option Valuation Problems-
dc.typeArticle-
dc.identifier.emailChing, WK: wching@hku.hk-
dc.identifier.authorityChing, WK=rp00679-
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.3934/jimo.2020060-
dc.identifier.scopuseid_2-s2.0-85104020219-
dc.identifier.hkuros323023-
dc.identifier.volume17-
dc.identifier.issue4-
dc.identifier.spage2097-
dc.identifier.epage2118-
dc.identifier.isiWOS:000634690500027-
dc.publisher.placeUnited States-

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