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Binomial models, which describe the asset price dynamics of the continuous-time model in the limit, serve for approximate valuation of options, especially where formulas cannot be derived… (More)

Viewing binomial models as a discrete approximation of the respective continuous models, the interest focuses on the notions of convergence and especially "fast" convergence of prices. Though many… (More)

In this paper we study Binomial Models with random time steps. We explain, how calculating values for European and American Call and Put options is straightforward for the Random-Time Binomial Model.… (More)

This paper analyses what determines an individual investor's risk-sharing demand for options and, aggregating across investors, what the equilibrium demand for options. We find that agents trade… (More)

- Fousseni Chabi-Yo, Dietmar P. J. Leisen, Éric Renault
- J. Economic Theory
- 2014

This paper characterizes the equilibrium demand and risk premiums in the presence of skewness risk. We extend the classical mean-variance two-fund separation theorem to a three-fund separation… (More)

Many derivatives prices and their Greeks are closed-form expressions in the Black-Scholes model; when the terminal distribution is a mixed lognormal, prices and Greeks for these derivatives are then… (More)

Stochastic volatility appears to be a fact of life in real-world derivatives markets, but it presents huge difficulties for valuation models. Adding a second stochastic variable in addition to the… (More)

This paper discusses the pitfalls in the pricing of barrier options using approximations of the underlying continuous processes via discrete lattice models. These problems are studied first in a… (More)

Asymmetric shocks are common in markets; securities' payoffs are not normally distributed and exhibit skewness. This paper studies the portfolio holdings of heterogeneous agents with preferences over… (More)