Thanks for visiting. This site provides supplementary material for the “Option Valuation under Stochastic Volatility” books: material that you won’t find at Amazon or other selling sites.
For the latest book,
“Option Valuation under Stochastic Volatility II”, you can find:
- the full Table of Contents (try theÂ Latest Book link)
- Abstracts for the first 12 chapters (try the 5-min Book Tour link)
- code files
In addition, you will find aÂ blog by Alan L. Lewis, the author.
AÂ featured chart from the latest book
What is it? This chart shows early exercise boundaries for the American-style put under discrete dividend models. The models are associated toÂ Black-Scholes (geometric Brownian motion, or GBM) stock price evolution. How to handle discrete dividends is, remarkably (even in this basic GBM case), still a contentious issue more than 40 years after Black and Scholes’ seminal publication.
Two general approaches are: (i) piecewiseÂ GBM, using various dividend policies , and (ii) escrowed dividends. The first two rows of the chart show the early exercise boundary in the plane under piecewise GBM and various . The last rowÂ shows the same in the plane under the escrowed dividend model, where is the risky part of the stock price. More details are found in Chapter 9 of the latest book.
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