Browsing by Author "Chang, Lung-Fu"

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A generalization of option pricing to price-limit markets
(2020-07-01)
Guo, Jia-Hau
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Chang, Lung-Fu
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交大名義發表
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National Chiao Tung University
This paper proposes an analytic solution for pricing options in markets with daily price limits. The Black-Scholes model is a nested case in which the daily price limit approaches infinity. Compared to the Black-Scholes model, our solution may solve the mispricing problem and could yield consistent results with existing numerical methods. Practitioners trading options in price-limit markets may resort to the finite difference method or Monte Carlo simulations. However, applying these numerical methods is often time consuming, thereby further illustrating the importance of an analytic solution.
A Generalization of the Recursive Integration Method for the Analytic Valuation of American Options
(2016-09)
Chang, Lung-Fu
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Guo, Jia-Hau
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Hung, Mao-Wei
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管理學院
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College of Management
This article provides a general accelerated recursive integration method for pricing American options based on stochastic volatility and double jump processes. Our proposed model is a generalization of the recursive integral representation method. American option prices can be evaluated by the sum of a corresponding European option price and an early exercise premium integral. Numerical results show that our proposed method is efficient and accuracy in pricing American options with stochastic volatility and double jump processes. (C) 2015 Wiley Periodicals, Inc.
Limit hits and informationally-related stocks
(2017-06-01)
Guo, Jia-Hau
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Chang, Lung-Fu
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Hung, Mao-Wei
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管理學院
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College of Management
We propose a method of propensity score matching to study limit hits on connected TWSE-listed stocks across industries between 1/1/2004 and 12/31/2013. The findings show significant liquidity and price impacts on connected stocks. We demonstrate that informed traders may trade connected stocks as a substitution for the hitting stock, and connected stocks seem to provide alternatives for uninformed traders to reverse their suboptimal trades even prior to the hit. In addition, our results indicate that liquidity impacts of limit hits with less information asymmetry are weaker and there is a common liquidity response of connected stocks to firm-specific limit hits. (C) 2017 Elsevier B.V. All rights reserved.
Repeated Richardson extrapolation and static hedging of barrier options under the CEV model
(1970-01-01)
Guo, Jia-Hau
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Chang, Lung-Fu
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資訊管理與財務金融系註：原資管所+財金所
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Department of Information Management and Finance
This paper proposes an accelerated static replication approach for continuous European-style barrier options by employing the repeated Richardson extrapolation technique with the Romberg sequence. This approach is developed under the constant elasticity of variance (CEV) model of Cox (1975) and Cox and Ross (1976) using the framework offered by Derman, Ergener, and Kani (1995; DEK) and its modified method of Chung et al. (2010, 2013a, 2013b) and Tsai (2014). The numerical results indicate that our method could significantly reduce replication errors for European knock-out call options and may be superior to the imposition of the theta-matching condition on the DEK method.