• Korean Journal of Mathematics
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• v.20 no.1
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• pp.47-60
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• 2012

We deal some analytic calculations for European option pricing by using the theory of elementary solution of generalized diffusion equation mainly.

• Asia-Pacific Journal of Business
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• v.11 no.3
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• pp.199-215
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• 2020

Purpose - This article tries to test if the conditional consumption capital asset pricing model (CCAPM) with bank credit for household as a conditional variable can explain the cross-sectional variation of stock returns in Korea. The performance of conditional CCAPM is compared to that of multifactor asset pricing models based on Arbitrage Pricing Theory. Design/methodology/approach - This paper extends the simple CCAPM to the conditional version of CCAPM by using bank credit for household as conditioning information. By employing KOSPI and KOSDAQ stocks as test assets from the second quarter of 2003 to the first quarter of 2018, this paper estimates risk premiums of conditional CCAPM and a variety of multifactor linear models such as Fama-French three and five-factor models. The significance of risk factors and the adjusted coefficient of determination are the basis for the comparison in models' performances. Findings - First, the paper finds that conditional CCAPM with bank credit performs as well as the multifactor linear models from Arbitrage Pricing theory on 25 test assets sorted by size and book-to-market. When using long-term consumption growth, the conditional CCAPM explains the cross-sectional variation of stock returns far better than multifactor models. Not only that, although the performances of multifactor models decrease on 75 test assets, conditional CCAPM's performance is well maintained. Research implications or Originality - This paper proposes bank credit for household as a conditional variable for CCAPM. This enables CCAPM, one of the most famous economic asset pricing models, to conform with the empirical data. In light of this, we can now explain the cross-sectional variation of stock returns from an economic perspective: Asset's riskiness is determined by its correlation with consumption growth conditional on bank credit for household.

• Proceedings of the Korean Operations and Management Science Society Conference
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• 2003.05a
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• pp.620-627
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• 2003

The real option pricing theory has emerged as the new investment decision-making techniques superceding the traditional discounted cash flow techniques and thus has greatly received muck attention from academics and practitioners in these days the theory has been widely applied to a variety of corporate strategic projects such as a new drug R&D, an internet start-up. an advanced manufacturing system. and so on A lot of people who are interested in the real option pricing theory complain that it is difficult to understand the true meaning of the real option value. though. One of the most conspicuous reasons for the complaint may be due to the fact that there exit many different ways to calculate the real options value in this paper, we will present a replicating portfolio method. a risk-neutral probability method. a risk-adjusted discount rate method (quasi capital asset pricing method). and an opportunity cost concept-based method under the conditions of a binomial lattice option pricing theory.

• Journal of Korean Society of Industrial and Systems Engineering
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• v.8 no.12
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• pp.13-25
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• 1985

• The Korean Journal of Financial Management
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• v.1 no.1
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• pp.133-149
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• 1985

The theory of option pricing has undergone rapid advances in recent years. Simultaneously, organized option markets have developed in the United States and Europe. The closed form solution for pricing options has only recently been developed, but its potential for application to problems in finance is tremendous. Almost all financial assets are really contingent claims. Especially, Black and Scholes(1973) suggest that the equity in a levered firm can be thought of as a call option. When shareholders issue bonds, it is equivalent to selling the assets of the firm to the bond holders in return for cash (the proceeds of the bond issues) and a call option. This paper takes the insight provided by Black and Scholes and shows how it may be applied to many of the traditional issues in corporate finance such as dividend policy, acquisitions and divestitures and capital structure. In this paper a combined capital asset pricing model (CAPM) and option pricing model (OPM) is considered and then applied to the derivation of equity value and its systematic risk. Essentially, this paper is an attempt to gain a clearer focus theoretically on the question of corporate stock risk and how the OPM adds to its understanding.

• The Korean Journal of Applied Statistics
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• v.24 no.4
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• pp.721-733
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• 2011

We consider the state price densities that are implicit in financial asset prices. In the pricing of an option, the state price density is proportional to the second derivative of the option pricing function and this relationship together with no arbitrage principle imposes restrictions on the pricing function such as monotonicity and convexity. Since the state price density is a proper density function and most of the shape constraints are caused by this, we propose to estimate the state price density directly by specifying candidate densities in a flexible nonparametric way and applying methods of regularization under extra constraints. The problem is easy to solve and the resulting state price density estimates satisfy all the restrictions required by economic theory.

• Korean Journal of Construction Engineering and Management
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• v.11 no.6
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• pp.54-64
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• 2010

A firm decides to go to the project based on its investment analysis. However, the cash flows generated from the real project can not be always coincident with what expected as it follows uncertain behavior and the asymmetric payoff caused by the managerial flexibilities involved in the real asset affects the project value. Amongst various managerial flexibilities entailed in most of the real assets, although investment delay has been known to enhance the project value thanks to its ability to provide new market information to management, the related research to select the time to invest have been just few. Therefore, this research aims to show the theoretical framework to decide when to invest reflecting the behaviors of increasing project value and loss recovery cost due to investment delay with option pricing, related financial economic, and variational theories.

• The Journal of Asian Finance, Economics and Business
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• v.7 no.9
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• pp.117-123
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• 2020

The objective of this study is to examine whether the four-factor model explains variation in the expected return of stocks on the Stock Exchange of Thailand. The study used individual monthly data for all stock with continuous trading on the Stock Exchange of Thailand. The study used sample data of 429 listed stocks to construct 8 portfolios bases on the industries. In this study, subject to market factors such as size, the book-to-market ratio, the market beta, and stock liquidity are taken into account. The Empirical analysis reveals that not all of the variables included in the four-factor asset pricing model are statistically significant to do affect the formation of the rate of return on stocks calculated on a monthly basis. The result shows that market beta, stock liquidity, and the book-to-market ratio has a significant increase in the rate of return on shares listed on the Consumer Products. It is therefore apparent that at least in respect of monthly analysis, the predictions of bass models in the field of modern finance theory systematic risk measured by the beta coefficient did play a significantly important role in the formation of the rate of return on the Stock Exchange of Thailand.

• The Journal of Asian Finance, Economics and Business
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• v.5 no.1
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• pp.11-16
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• 2018

This research examines the alternative ways of estimating the coefficient of non-diversifiable risk, namely beta coefficient, in Capital Asset Pricing Model (CAPM) introduced by Sharpe (1964) that is an essential element of assessing the value of diverse assets. The non-parametric methods used in this research are the robust Least Trimmed Square (LTS) and Maximum likelihood type of M-estimator (MM-estimator). The Jackknife, the resampling technique, is also employed to validate the results. According to finance literature and common practices, these coecients have often been estimated using Ordinary Least Square (LS) regression method and monthly return data set. The empirical results of this research pointed out that the robust Least Trimmed Square (LTS) and Maximum likelihood type of M-estimator (MM-estimator) performed much better than Ordinary Least Square (LS) in terms of eciency for large-cap stocks trading actively in the United States markets. Interestingly, the empirical results also showed that daily return data would give more accurate estimation than monthly return data in both Ordinary Least Square (LS) and robust Least Trimmed Square (LTS) and Maximum likelihood type of M-estimator (MM-estimator) regressions.

• The Korean Journal of Financial Management
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• v.20 no.1
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• pp.305-329
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• 2003

This work analyzes the influence of the dollar and yen currency on the rate of return of the individual firms and its symmetries based on the data from Jan. 5 1987 to Dec. 28, 2001. GARCH and autoregressive error models were used for on the daily data, due to the heteroscedascity and autoregression of the error terms, and as for the monthly data, this paper follows the autoregressive error models. Daily data fumed out to be a better explanatory variable in detecting exchange rate exposure, and EGARCH(1, 1) and GJR-GRARCH(1, 1) have higher competence in analyzing the daily data. Also, most of the exposed firms have been exposed in the negative region, and appreciation of exchange rate does not help enhancing the asset value of the domestic value. Analysis on the asymmetries let us conclude that high proportion of domestic firms face asymmetric exchange rate exposure, and that the pricing-to-market theory carries more conviction than the real option theory. Furthermore, monthly data are more precise in analysis of asymmetries.