Title: Comparing three different valuation methods
Language: English
Authors: Bondi, Alessandro 
Qualification level: Diploma
Advisor: Rheinländer, Thorsten 
Issue Date: 2021
Number of Pages: 79
Qualification level: Diploma
Motivated by new financial markets where there is no canonical choice of a risk-neutral measure, we compared two different methods for pricing options: calibration with an entropic penalty term and valuation by the Esscher measure. The main aim of this paper is to contrast the outcomes of those two methods with real-traded call option prices in a liquid market like NASDAQ stock exchange, using data referring to the period 2019–2020. Although the Esscher measure method slightly underperforms the calibration method in terms of absolute values of the percentage difference between real and model prices, it could be the only feasible choice if there are not many liquidly traded derivatives in the market.
Keywords: option valuation; Esscher measure
URI: https://doi.org/10.34726/hss.2021.65740
DOI: 10.34726/hss.2021.65740
Library ID: AC16147245
Organisation: E105 - Institut für Stochastik und Wirtschaftsmathematik 
Publication Type: Thesis
Appears in Collections:Thesis

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