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The valuation of reset options with multiple strike resets and reset dates
Author(s) -
Liao SzuLang,
Wang ChouWen
Publication year - 2003
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.10055
Subject(s) - reset (finance) , waviness , jump , valuation (finance) , computer science , mathematics , economics , financial economics , physics , engineering , finance , mechanical engineering , quantum mechanics
This article makes two contributions to the literature. The first contribution is to provide theclosed‐form pricing formulas of reset options with strike resets and predecided reset dates. The exactclosed‐form pricing formulas of reset options with strike resets and continuous reset period are alsoderived. The second contribution is the finding that the reset options not only have the phenomena of Delta jumpand Gamma jump across reset dates, but also have the properties of Delta waviness and Gamma waviness, especiallynear the time before reset dates. Furthermore, Delta and Gamma can be negative when the stock price is near thestrike resets at times close to the reset dates. © 2003 Wiley Periodicals, Inc. Jrl Fut Mark23:87–107,2003

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