Market-conform valuation of options. (Q819979)

This book is the author's doctoral thesis. It is for students and professionals in option pricing and related topics. The focus of this book lays on the development of new approaches of market-conform valuation of derivatives. The new approaches are demonstrated by some examples. This book has five chapters. After chapter 1 (Introduction), chapter 2 constructs arbitrage-free implied trees. Chapter 3 treats an empirical assessment of alternative approaches. Chapter~4 regards market-conform valuation of American-style options via Monte Carlo simulation. Chapter 5 (Synapse) condenses the subjet of the book and gives an overview and outlook for research in German. After the introduction (chapter 1) regarding the area of research and structure of the thesis, chapter 2 (Construction of Arbitrage-Free Implied Trees: A New Approach) presents a new approach to identify the binominal process of the underlying asset price by using a simultaneous backward and forward induction algorithm. Possible modifications are shown to speed up the computations. Further, arbitrage-free multinominal trees are regarded. The model is compared to existing approaches. An example illustrates the flexibility of the model. Chapter 3 (Market-Conform 0ption Valuation: An Empirical Assessment of Alternative Approaches) considers the model of Black and Scholes, Heston, naive-trader-rules, deterministic volatility models, implied binominal trees, and weighted Monte Carlo techniques. The models are used to price observed option prices of American call options and knock-out options traded at the EUWAX. Chapter 4 (Market-Conform Valuation of American-Style Options via Monte-Carlo Simulation) discusses new methods to value American options via Monte-Carlo simulation. Two new approaches are presented. The effect of weighted Monte-Carlo paths to reproduce market prices correctly are described followed by comparing the effects with market data and illustrating the original techniques and the author's extensions based on the valuation of standard American put options. Chapter 5 (Synopse) closes the book with an overview and outlook in german.