The valuation of knock-out power calls under Black-Scholes framework
Knock-out power calls are options that incorporate barriers to the valuation of power calls. Introducing barriers to power calls reduces the costs to hold power calls which are known to have higher leverage than the standard vanillas. In this paper, we model the valuation of knock-out power calls...
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Lviv Polytechnic National University
2022
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| Online Access: | http://psasir.upm.edu.my/id/eprint/102461/ https://science.lpnu.ua/mmc/all-volumes-and-issues/volume-9-number-1-2022/valuation-knock-out-power-calls-under-black |
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my.upm.eprints.1024612023-04-12T01:32:37Z http://psasir.upm.edu.my/id/eprint/102461/ The valuation of knock-out power calls under Black-Scholes framework Sawal, A. S. Ibrahim, S. N. I. Laham, M. F. Knock-out power calls are options that incorporate barriers to the valuation of power calls. Introducing barriers to power calls reduces the costs to hold power calls which are known to have higher leverage than the standard vanillas. In this paper, we model the valuation of knock-out power calls using Crank–Nicolson and Monte Carlo simulation under Black–Scholes environment. Results show that Crank–Nicolson is more accurate and more efficient than Monte Carlo simulation for pricing knock-out power calls. Lviv Polytechnic National University 2022 Article PeerReviewed Sawal, A. S. and Ibrahim, S. N. I. and Laham, M. F. (2022) The valuation of knock-out power calls under Black-Scholes framework. Mathematical Modeling and Computing, 9 (1). pp. 57-64. ISSN 2312-9794 https://science.lpnu.ua/mmc/all-volumes-and-issues/volume-9-number-1-2022/valuation-knock-out-power-calls-under-black 10.23939/mmc2022.01.057 |
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Knock-out power calls are options that incorporate barriers to the valuation of power calls. Introducing barriers to power calls reduces the costs to hold power calls which are known to have higher leverage than the standard vanillas. In this paper, we model the valuation of knock-out power calls using Crank–Nicolson and Monte Carlo simulation under Black–Scholes environment. Results show that Crank–Nicolson is more accurate and more efficient than Monte Carlo simulation for pricing knock-out power calls. |
| format |
Article |
| author |
Sawal, A. S. Ibrahim, S. N. I. Laham, M. F. |
| spellingShingle |
Sawal, A. S. Ibrahim, S. N. I. Laham, M. F. The valuation of knock-out power calls under Black-Scholes framework |
| author_facet |
Sawal, A. S. Ibrahim, S. N. I. Laham, M. F. |
| author_sort |
Sawal, A. S. |
| title |
The valuation of knock-out power calls under Black-Scholes framework |
| title_short |
The valuation of knock-out power calls under Black-Scholes framework |
| title_full |
The valuation of knock-out power calls under Black-Scholes framework |
| title_fullStr |
The valuation of knock-out power calls under Black-Scholes framework |
| title_full_unstemmed |
The valuation of knock-out power calls under Black-Scholes framework |
| title_sort |
valuation of knock-out power calls under black-scholes framework |
| publisher |
Lviv Polytechnic National University |
| publishDate |
2022 |
| url |
http://psasir.upm.edu.my/id/eprint/102461/ https://science.lpnu.ua/mmc/all-volumes-and-issues/volume-9-number-1-2022/valuation-knock-out-power-calls-under-black |
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1762963291519320064 |