• 대한수학회보
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• 제60권2호
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• pp.361-388
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• 2023

In this study, we deal with American lookback option prices on dividend-paying assets under a stochastic volatility (SV) model. By using the asymptotic analysis introduced by Fouque et al. [17] and the Laplace-Carson transform (LCT), we derive the explicit formula for the option prices and the free boundary values with a finite expiration whose volatility is driven by a fast mean-reverting Ornstein-Uhlenbeck process. In addition, we examine the numerical implications of the SV on the American lookback option with respect to the model parameters and verify that the obtained explicit analytical option price has been obtained accurately and efficiently in comparison with the price obtained from the Monte-Carlo simulation.

• 대한산업공학회지
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• 제38권4호
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• pp.249-253
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• 2012

This paper suggests a numerical method for valuation of American options under the Kou model (double exponential jump diffusion model). The method is based on approximation of underlying asset price using a finite-state, time-homogeneous Markov chain. We examine the effectiveness of the proposed method with simulation results, which are compared with those from the conventional numerical method, the finite difference method for PIDE (partial integro-differential equation).

• Management Science and Financial Engineering
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• 제19권2호
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• pp.37-42
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• 2013

This paper suggests a numerical method for valuation of European and American options under the two L$\acute{e}$vy Processes, Normal Inverse Gaussian Model and the Variance Gamma model. The method is based on approximation of underlying asset price using a finite-state, time-homogeneous Markov chain. We examine the effectiveness of the proposed method with simulation results, which are compared with those from the existing numerical method, the lattice-based method.

• Asian Journal of Innovation and Policy
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• 제7권3호
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• pp.581-605
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• 2018

In the soft drink industry, especially small and medium enterprises in Japan, there is a possibility of conversion from a labor-intensive industry to a capital-intensive. The demand for soft drinks may not be satisfied in the summer because the supply is too low to meet the demand. To address this situation, this paper proposes optimal investment that integrates demand uncertainty, based on real options approach (ROA) and seasonal autoregressive integrated moving average. Two alternative options are compared and evaluated. One is the Bermudan option: to employ additional workers to elevate efficiency in summer and laying off in winter, this attitude is repeated each year. The other is the American option: to replace equipment to increase machine ability throughout the year. Results in ROA show that the highest improvement is gained if the two options are in a symbiotic relationship. Soft drink producers should search for replacing equipment, using the employees repeatedly. A temporary decision is not equal to an infinite decision.

• 대한산업공학회지
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• 제32권3호
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• pp.180-190
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• 2006

We evaluate the economic value and the optimal investment timing of IMT-2000 in Korea, in the perspective of a service provider who owns the business license for IMT-2000, by using the real options analysis. The result clearly shows the project value with options is positive and delaying the investment is more favorable to the provider. Binomial lattice approach, in which we try to describe American call option and sequential compound option, and sensitivity analysis present the optimal decisions according to future states and enable the management to make decision strategically and proactively.

• 재무관리논총
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• 제3권1호
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• pp.213-231
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• 1996

In this study we conduct a specification test of at-the-money option volatility. Results show that the implied volatility estimate recovered from the Black-Scholes European option pricing model is nearly indistinguishable from the implied volatility estimate obtained from the Barone-Adesi and Whaley's American option pricing model. This study also investigates whether the use of Black-Scholes implied volatility estimates in American put pricing model significantly affect the prediction the prediction of American put option prices. Results show that, at long as the possibility of early exercise is carefully controlled in calculation of implied volatilities prediction of American put prices is not significantly distorted. This suggests that at-the-money option implied volatility estimates are robust across option pricing model.

• Journal of the Korean Society for Industrial and Applied Mathematics
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• 제15권2호
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• pp.151-160
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• 2011

Typically, it is hard to find a closed form solution of option pricing formula under an asset governed by a change point process. In this paper we derive a closed-form solution of the valuation function for an American perpetual put option under an asset having a change point. Structural changes are formulated through a change-point process with a Markov chain. The modified smooth-fit technique is used to obtain the closed-form valuation function. We also guarantee the optimality of the solution via the proof of a corresponding verification theorem. Numerical examples are included to illustrate the results.

• Industrial Engineering and Management Systems
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• 제10권2호
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• pp.170-177
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• 2011

We present an improved binomial method for pricing financial deriva-tives by using cell averages. After non-overlapping cells are introduced around each node in the binomial tree, the proposed method calculates cell averages of payoffs at expiry and then performs the backward valuation process. The price of the derivative and its hedging parameters such as Greeks on the valuation date are then computed using the compact scheme and Richardson extrapolation. The simulation results for European and American barrier options show that the pro-posed method gives much more accurate price and Greeks than other recent lattice methods with less computational effort.

• 한국문헌정보학회지
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• 제7권
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• pp.225-259
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• 1980

The second edition of the Anglo-American Cataloguing Rules (AACR 2) was published in December 1978. In 1974 representatives Qf five bodies from Canada, the United Kingdom and the United States established the Joint Steering Committee for Revision of AACR, and set the aims, structure, and content of AACR 2. Although the goal of a single text for Britain and North America was achieved in AACR 2, the American library community expressed concern about cost-effectiveness of adoption of the new code, and consquently the LC implementation plan called for some minor departures from AACR 2. LC's plan to depart from a number of provisions of the new code will cause a continuation of the problems presented by past practices of superimposition. The purpose of this paper is to examine the revisions made in AACR 2 in the hope that it will contribute to efforts of Korean librarians seeking to focus on the major questions requiring discussion and decisions before adoption of AACR 2 by Korean research libraries who have already adopted Anglo-American Cataloging Rules for Western materials. In this paper attempts were made to follow the order of subjects treated in the code, beginning with general revisions, followed by a discussion of each of the parts of the code, the first for bibliographic description and the second for choice and form of access points. The differences between AACR 1 and AACR 2 that will be most significant to cataloguers are compared with examples. Comparative analysis of optional and alternative rules are viewed from a historical background, and their practical applications for the different types of libraries / or materials are discussed. Specifications of the options adapted by the Library of Congress are presented. Adaption of AACR 2 poses continual problems in Korea. It is very important to maintain consistent sets of information consistently presented in the catalogue regardless of its language. The recognition by cataloguers of the urgent need for conformity and campatability of catalogue between Western mateirals and Oriental materials is recommended, if AACR 2 is to be adapted. It would be intolerable for the catalogue users, if different standards of description and headings were to apply in the same catalogue.

• Journal of the Korean Society for Industrial and Applied Mathematics
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• 제15권1호
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• pp.1-17
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• 2011

A new method for option pricing based on the trinomial tree method is introduced. The new method calculates the local average of option prices around a node at each time, instead of computing prices at each node of the trinomial tree. Local averaging has a smoothing effect to reduce oscillations of the tree method and to speed up the convergence. The option price and the hedging parameters are then obtained by the compact scheme and the Richardson extrapolation. Computational results for the valuation of European and American vanilla and barrier options show superiority of the proposed scheme to several existing tree methods.