Option bounds in discrete time: extensions and the pricing of American put

Article Abstract:

The work of Perrakis and Ryan (1985) on upper and lower bounds of European option prices derived in discrete time can be applied to the American system of put options. The mathematical models used to derive the bound have been tightened up to provide more precise results. The working assumptions of the model are general and may be altered to account for such activities as dividends and transaction costs. The bounds derived are exact the the single distribution time is employed but are approximations if early exercise of an option occurs (a more representative view of reality).

Options (Finance)

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A general distribution for describing security price returns

Article Abstract:

A generalized distribution for describing security returns is introduced. Referred to as the GB2 distribution, the model is highly flexible and contains many well-known distributions, including the log-normal, log-Cauchy and log-t. Because of GB2's flexibility, different degrees of fat tails in distributions can be directly represented. GB2 is useful in making empirical estimations of security returns and in developing option pricing models that require the mathematical manipulation of distributions.

Research, Methods, Return on investment, Rate of return, Distribution (Probability theory), Financial research

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Parsimonious modeling of yield curves

Article Abstract:

A simple, parsimonious model representing the typical range of yield curves is presented. Monotonic, humped, and S-shaped curves fit this model, which describes the variation in Treasury bill yields across maturities from 1981-1983. The model reflects and verifies a change in Federal Reserve policy in 1982. If the model reflects term structure, then it should also be able to predict yields and prices at maturities in the long term.

Prices and rates, Negotiable instruments, Treasury bills

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