• 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.

• Korean Journal of Mathematics
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• v.29 no.2
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• pp.409-424
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• 2021

In this paper, we investigate a pricing model for mortgage-backed securities (MBSs) of a pay-through type of collateral mortgage obligation (CMO), embedded call options, which can be exercised by the intermediary, and pass-through MBSs. We suggest a prepayment-risk-neutral pricing model, applying a reduced-form prepayment rate model, and then compute and investigate the appropriate prices and spreads in the coupon rates between CMOs and PT MBSs. We believe that this study contributes in that it provides a sophisticated pricing model for MBSs, especially to the financial markets which are not advanced enough to finance with a simple type of MBSs.

• The Pure and Applied Mathematics
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• v.21 no.4
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• pp.295-305
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• 2014

Yan & Hanson [8] and Makate & Sattayatham [6] extended Bates' model to the stochastic volatility model with jumps in both the stock price and the variance processes. As the solution processes of finding the characteristic function, they sought such a function f satisfying $$f({\ell},{\nu},t;k,T)=exp\;(g({\tau})+{\nu}h({\tau})+ix{\ell})$$. We add the term of order ${\nu}^{1/2}$ to the exponent in the above equation and seek the explicit solution of f.

• The Korean Journal of Applied Statistics
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• v.24 no.1
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• pp.83-92
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• 2011

This paper examines empirically Durham's (2008) asset pricing models to the KOSPI200 index. This model Incorporates the VKOSPI index as a proxy for 1 month integrated volatility. This approach uses option prices to back out implied volatility states with an explicitly speci ed risk-neutral measure and risk premia estimated from the data. The application uses daily observations of the KOSPI200 and VKOSPI indices from January 2, 2003 to September 24, 2010. The empirical results show that non-affine model perform better than affine model.

• Journal of Korean Institute of Industrial Engineers
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• v.38 no.4
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• pp.244-248
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• 2012

We present a simple numerical method for pricing American put options under a constant elasticity of variance (CEV) model. Our analysis is done in a general framework where only the risk-neutral transition density of the underlying asset price is given. We obtain an integral equation of early exercise premium. By exploiting a modification of the integral equation, we propose a novel and simple numerical iterative valuation method for American put options.

• Korean Journal of Construction Engineering and Management
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• v.13 no.2
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• pp.102-109
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• 2012

One of key success factors in PPI(Public Private Investment) is the structure of risk sharing between the public and the private, and the determination mechanism of fair return to private participants relative to the risk that private participants undertake. In Korea, two basic types of PPI exist. One is BTO and the other is BTL. In BTO, most risks are taken by the private whereas the opposite is the case in BTL. No intermediate form exists. As a result, BTO type projects had difficulty in attracting private participants because of the excessive risks. In this study, one intermediate form is studied where demand risk is shared between the public and the private. In the setting where the public authority takes all the project revenues and then pays ladder type payments to private participants depending upon the level of project revenues, appropriate level of fixed payments is endogenously derived using the real option pricing model. From the fixed payments, expected investment returns are calculated based upon a certain distributional assumption. The results of this study is expected to help introducing diverse forms of PPI in Korea.

• The Korean Journal of Applied Statistics
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• v.30 no.2
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• pp.243-257
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• 2017

In this paper, we compare several methods to approximate option prices: Edgeworth expansion, A-type and C-type Gram-Charlier expansions, a method using normal inverse gaussian (NIG) distribution, and an asymptotic method using nonlinear regression. We used two different types of approximation. The first (called the RNM method) approximates the risk neutral probability density function of the log return of the underlying asset and computes the option price. The second (called the OPTIM method) finds the approximate option pricing formula and then estimates parameters to compute the option price. For simulation experiments, we generated underlying asset data from the Heston model and NIG model, a well-known stochastic volatility model and a well-known Levy model, respectively. We also applied the above approximating methods to the KOSPI200 call option price as a real data application. We then found that the OPTIM method shows better performance on average than the RNM method. Among the OPTIM, A-type Gram-Charlier expansion and the asymptotic method that uses nonlinear regression showed relatively better performance; in addition, among RNM, the method of using NIG distribution was relatively better than others.