• Journal of the Korean Society for Industrial and Applied Mathematics
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• v.15 no.1
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• pp.31-41
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• 2011

I introduce a derivative called "Snowball Currency Option" or "USDKRWSnowball Extendible At Expiry KO" which was traded once in the over-the-counter market in Korea. A snowball currency option consists of a series of maturities the payoffs at which are like those of a long position in a put option and two short position in an otherwise identical call. The strike price at each maturity depends on the exchange rate and the previous strike price so that the strike prices are random and path-dependent, which makes it difficult to find a closed form solution of the value of a snowball currency option. I analyze the payoff structure of a snowball currency option and derive an upper and a lower boundaries of the value of it in a simplified model. Furthermore, I derive a pricing formula using integral in the simplified model.

• Journal of the Korean Data and Information Science Society
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• v.22 no.1
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• pp.37-47
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• 2011

Stock price index option market has various investment strategies that have been developed. Specially, arbitrage strategies are very important to be efficient in option market. The purpose of this study is to improve profit using rough set and Box spread by using past option trading data. Option trading data was based on an actual stock exchange market tick data ranging from 2001 to 2006. Validation process was carried out by transferring the tick data into one-minute intervals. Box spread arbitrage strategies is low risk but low profit. It can be accomplished by back-testing of the existing strategy of the past data and by using rough set, which limit the time line of dealing. This study can make more stable profits with lower risk if control the strategy that can produces a higher profit module compared to that of the same level of risk.

• Asian Journal of Innovation and Policy
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• v.7 no.1
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• pp.178-189
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• 2018

In this paper, we present a case study of a new emerging business startup involved in smart house appliances. The irreversible investment concept and real-option theory are introduced as the fundamentals of the model. By using games theory we show that the startup's actions can trigger reactions from other firms. The first part covers initial the research and development stage, while the second part covers production and commercialization. The findings of this study suggest that, given a certain amount of initial investment, an open and shared innovation may lead to hurting a firm's investment while strengthening the competitors' position in the market. However, given the sensitivity analysis, when volatility and demand grow favorably, sharing R&D investment is not a bad option for a new player to adjust its position in the market while still maintaining positive returns.

• Proceedings of the Korean Society of Computational and Applied Mathematics Conference
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• 2003.09a
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• pp.10-10
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• 2003

Option pricing theory developed by Black and Sholes depends on an arbitrage opportunity argument. An investor can exactly replicate the returns to any option on that stock by continuously adjusting a portfolio consisting of a stock and a riskless bond. The value of the option equal the value of the replicating portfolio. However, transactions costs invalidate the Black-Sholes arbitrage argument for option pricing, since continuous revision implies infinite trading, Discrete revision using Black-Sholes deltas generates errors which are correlated with the market, and do not approach zero with more frequent revision when transactions costs are included. Stochastic calculus serves as a fundamental tool in the mathematical finance. We closely look at the utility maximization theory which is one of the main option valuation methods. We also see that how the stochastic optimal control problems and their solution methods are applied to the theory.

• Korean Journal of Computational Design and Engineering
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• v.5 no.3
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• pp.224-231
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• 2000

In order to satisfy customers'various needs in the market, manufacturing companies tend to add similar variants to an existing product model. This variety causes immense growth of product configuration and makes data management uncontrollable. In order to resolve this problem, we propose a method to efficiently represent the variants in a single schema of product structure and configuration and manage the product configuration. First of all, the product structure which adopts the concept of features and options is suggested. Second, the method to represent option specifications which restricts option configurations is proposed. Finally, the prototype module, which inspects if a product configuration violates the option specifications, is introduced.

• International Journal of Railway
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• v.2 no.2
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• pp.80-92
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• 2009

Successful market adoption of rail freight transport innovations that might offer opportunities for market share increase is the focus of this paper. Firstly, seen from a theoretical point of view, it is not incremental innovations but radical organizational and transformation innovations that are likely to increase the market share of rail freight transport. Secondly, the particular inovations that offer some success potential for market adoption are: dedicated infrastructure, the fixed timetable, locomotive upgrades, and INTERFACE. Thirdly, unfortunately, the opportunities to increase the market share of rail freight transport appear to be limited.

• Journal of the Korean Society for Industrial and Applied Mathematics
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• v.7 no.2
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• pp.13-22
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• 2003

Simulations on the nonlinear partial differential equation derived from Black-Scholes equation with transaction costs are performed. These numerical experiments using finite element methods are applied to KOSPI200 in 2002 and the option prices obtained with transaction costs are closer to the real prices in market than the prices used in Korea Stock Exchange.

• Bulletin of the Korean Mathematical Society
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• v.56 no.5
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• pp.1129-1141
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• 2019

We propose a stochastic delay financial model which describes influences driven by historical events. The underlying is modeled by stochastic delay differential equation (SDDE), and the delay effect is modeled by a stopping time in coefficient functions. While this model makes good economical sense, it is difficult to mathematically deal with this. Therefore, we circumvent this model with similar delay effects but mathematically more tractable, which is by the backward time integration. We derive the option pricing equation and provide the option price and the perfect hedging portfolio.

• Journal of Distribution Science
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• v.13 no.5
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• pp.53-60
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• 2015

Purpose - The purpose of this paper is to shed light on the importance of the slope and curvature of the volatility curve implied in option prices in the KOSPI 200 options index. A number of studies examine the implied volatility curve, however, these usually focus on cross-sectional characteristics such as the volatility smile. Contrary to previous studies, we focus on time-series characteristics; we investigate correlation dynamics among slope, curvature, and level of the implied volatility curve to capture market information embodied therein. Our study may provide useful implications for investors to utilize current market expectations in managing portfolios dynamically and efficiently. Research design, data, and methodology - For our empirical purpose, we gathered daily KOSPI200 index option prices executed at 2:50 pm in the Korean Exchange distribution market during the period of January 2, 2004 and January 31, 2012. In order to measure slope and curvature of the volatility curve, we use approximated delta distance; the slope is defined as the difference of implied volatilities between 15 delta call options and 15 delta put options; the curvature is defined as the difference between out-of-the-money (OTM) options and at-the-money (ATM) options. We use generalized method of moments (GMM) and the seemingly unrelated regression (SUR) method to verify correlations among level, slope, and curvature of the implied volatility curve with statistical support. Results - We find that slope as well as curvature is positively correlated with volatility level, implying that put option prices increase in a downward market. Further, we find that curvature and slope are positively correlated; however, the relation is weakened at deep moneyness. The results lead us to examine whether slope decreases monotonically as the delta increases, and it is verified with statistical significance that the deeper the moneyness, the lower the slope. It enables us to infer that when volatility surges above a certain level due to any tail risk, investors would rather take long positions in OTM call options, expecting market recovery in the near future. Conclusions - Our results are the evidence of the investor's increasing hedging demand for put options when downside market risks are expected. Adding to this, the slope and curvature of the volatility curve may provide important information regarding the timing of market recovery from a nosedive. For financial product distributors, using the dynamic relation among the three key indicators of the implied volatility curve might be helpful in enhancing profit and gaining trust and loyalty. However, it should be noted that our implications are limited since we do not provide rigorous evidence for the predictability power of volatility curves. Meaning, we need to verify whether the slope and curvature of the volatility curve have statistical significance in predicting the market trough. As one of the verifications, for instance, the performance of trading strategy based on information of slope and curvature could be tested. We reserve this for the future research.

• Korean Journal of Construction Engineering and Management
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• v.10 no.5
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• pp.135-147
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• 2009

The world has witnessed the dramatic expansion of international construction markets during the last decades, particularly around the developing economies and energy resource-rich countries. However, despite the booming markets, the risks of emerging regions have also increased under the rapidly changing environments confronting the global contractors. Most of all, success in overseas business mainly depends on selecting the right market to enter. Accordingly, the right market selection requires global firms to carefully carry out the scientific market entry decision by evaluating country risks, market prospects, firm's capability, level of competition, and among others. This study aims at developing a market entry model by the use of real option analysis (ROA) and scenario planning, which addresses the corporate strategic flexibility against the uncertainties encompassing the overseas construction markets. Based on the suggested approach, global contractors are expected to make a better decision rather than a typically static approach in pursuing, postponing, or abandoning a prospective market to their capacity with a concurrent consideration of uncertainties as well as its option value.