• Proceedings of the Korea Inteligent Information System Society Conference
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• 2000.11a
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• pp.489-497
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• 2000

After IMF situation, the money market environment is changing rapidly. Therefore, many companies including financial institutions and many individual investors are concerned about forecasting the money market, and they make an effort to insure the various profit and hedge methods using derivatives like option, futures and swap. In this research, we developed a prototype of forecasting system for KOSPI 200 option, especially call option, trading using artificial neural networks(ANN), To avoid the overfitting problem and the problem involved int the choice of ANN structure and parameters, we employed the ANN ensemble approach. We conducted two types of simulation. One is conducted with the hold signals taken into account, and the other is conducted without hold signals. Even though our models show low accuracy for the sample set extracted from the data collected in the early stage of IMF situation, they perform better in terms of profit and stability than the model that uses only the theoretical price.

• Journal of Advanced Navigation Technology
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• v.15 no.1
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• pp.104-111
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• 2011

In this study, I have tried to analyze an influence of R&D investment on ROV(Real Option Value), corporate value and market value by analyzing R&D investment, ROV, corporate value and market value of machine and material industry in the perspective of ex post. As a result of this study, corporate value, which has been deduced by real option according to R&D investment, reflects market value well and possesses a strong correlation with R&D investment, ROV, corporate value and market value. This implication demonstrates this study result is corresponding with existing theories.

• Journal of the Korean Statistical Society
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• v.36 no.2
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• pp.237-256
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• 2007

This paper studies the problem of option pricing in an incomplete market. The market incompleteness comes from the discontinuity of the underlying asset price process which is, in particular, assumed to be a compound Poisson process. To find a reasonable price for a European contingent claim, we first find the unique minimal martingale measure and get a price by taking an expectation of the payoff under this measure. To get a closed-form price, we use an asymptotic expansion. In case where the minimal martingale measure is a signed measure, we use a sequence of martingale measures (probability measures) that converges to the equivalent martingale measure in the limit to compute the price. Again, we get a closed form of asymptotic option price. It is the Black-Scholes price and a correction term, when the distribution of the return process has nonzero skewness up to the first order.

• Communications for Statistical Applications and Methods
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• v.17 no.4
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• pp.575-589
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• 2010

Exponential L$\acute{e}$evy models have become popular in modeling price processes recently in mathematical finance. Although it is a relatively simple extension of the geometric Brownian motion, it makes the market incomplete so that the option price is not uniquely determined. As a trial to find an appropriate price for an option, we suppose a situation where a hedger wants to initially invest as little as possible, but wants to have the expected squared loss at the end not exceeding a certain constant. For this, we assume that the underlying price process follows a variance-gamma model and it converges to a geometric Brownian motion as its quadratic variation converges to a constant. In the limit, we use the mean-variance approach to find the asymptotic minimum investment with the expected squared loss bounded. Some numerical results are also provided.

• Management Science and Financial Engineering
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• v.21 no.2
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• pp.13-23
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• 2015

This study addresses the question as to whether the option prices have useful predictive information on the direction of stock markets by investigating a forecasting power of volatility curvatures and skewness premiums implicit in S&P 500 index option prices traded in Chicago Board Options Exchange. We begin by estimating implied volatility functions and risk neutral price densities every minute based on non-parametric method and then calculate volatility curvature and skewness premium using them. The rationale is that high volatility curvature or high skewness premium often leads to strong bullish sentiment among market participants. We found that the rate of return on the signal following trading strategy was significantly higher than that on the intraday buy-and-hold strategy, which indicates that the S&P500 index option prices have a strong forecasting power on the direction of stock index market. Another major finding is that the information contents of S&P 500 index option prices disappear within one minute, and so one minute-delayed signal following trading strategy would not lead to any excess return compared to a simple buy-and-hold strategy.

• The Korean Journal of Financial Management
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• v.20 no.1
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• pp.61-92
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• 2003

As an extension of previous researches with the conclusion that the announcement of adopting stock options generates positive abnormal returns, this paper examined whether the abnormal return changes over time or varies depending on the number of stock options granted. Empirical analysis was made to find whether the announcement of stock option awards has the same response in the stock market from the early days when stock option plans had been introduced in the Korean stock market till today when it was widespread. Results indicate that the announcement effect had been on a gradual decline since 2000. In addition, it is found that if a company announces stock option awards several times, the abnormal return gradually declines in proportion of the number of stock options granted. This implies that as the stock option awards become widespread, the positive effect that the announcement of adopting stock options generates as news has been on a relatively steady decrease. In short, it leads to a conclusion that the more companies grant stock options, and the more stock options a company announces, the less impact it has on the increase in the firm's value.

• Industrial Engineering and Management Systems
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• v.10 no.1
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• pp.84-94
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• 2011

In this paper, we propose a method to provide the distribution of option price under local volatility model when market-provided implied volatility data are given. The local volatility model is one of the most widely used smile-consistent models. In local volatility model, the volatility is a deterministic function of the random stock price. Before estimating local volatility surface (LVS), we need to estimate implied volatility surfaces (IVS) from market data. To do this we use local polynomial smoothing method. Then we apply the Dupire formula to estimate the resulting LVS. However, the result is dependent on the bandwidth of kernel function employed in local polynomial smoothing method and to solve this problem, the proposed method in this paper makes use of model averaging approach by means of bandwidth priors, and then produces a robust local volatility surface estimation with a confidence interval. After constructing LVS, we price barrier option with the LVS estimation through Monte Carlo simulation. To show the merits of our proposed method, we have conducted experiments on simulated and market data which are relevant to KOSPI200 call equity linked warrants (ELWs.) We could show by these experiments that the results of the proposed method are quite reasonable and acceptable when compared to the previous works.

• Communications of the Korean Mathematical Society
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• v.23 no.1
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• pp.141-151
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• 2008

In this paper, we derive the nonlinear equation for European option pricing containing liquidity risk which can be defined as the inverse of the partial derivative of the underlying asset price with respect to the amount of assets traded in the efficient market. Numerical solutions are obtained by using finite element method and compared with option prices of KOSPI200 Stock Index. These prices computed with liquidity risk are considered more realistic than the prices of Black-Scholes model without liquidity risk.

• Proceedings of the Korea Technology Innovation Society Conference
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• 2000.11a
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• pp.297-311
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• 2000

Since 1996 when Kosdaq market was set up, serious doubt has been raised regarding the efficiency of the market. The most important question is whether this market can reflect the real value of the venture company quoted on it. In order to answer this question, this study aimed to evaluate venture companies in Kosdaq market adopting the concept of real option theory. From the results of empirical analysis, we found that in the early 2000, there was serious over-valuation problem. On the contrary, in the recent period of economic recession, under-valuation problem is quite prevalent. We also present our methodology and empirical results confirm the conjecture that option premium outweighs the DCF valor for the newly born and high-technology intensive venture companies. We hope that the empirical results shed some light on the policy prescription to improve the efficiency of Kosdaq market.

• East Asian mathematical journal
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• v.37 no.5
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• pp.553-566
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• 2021

In the over-the-counter market, option's buyers could have a problem for default risk caused by option's writers. In addition, many participants try to maximize their benefits obviously in investing the financial derivatives. Taking all these circumstances into consideration, we deal with the vulnerable power options under a constant elasticity variance (CEV) model. We derive an analytic pricing formula for the vulnerable power option by using the asymptotic analysis, and then we verify that the analytic formula can be obtained accurately by comparing our solution with Monte-Carlo price. Finally, we examine the effect of CEV on the option price based on the derived solution.