Abstract
In view of the so well acceptance by practitioners of the Black-Scholes model it is important to investigate the possible extensions of the theory and its value as an approximation for computations in non standard situations. Besides, this field is typically a source of adaptive identification of parameters, namely the 'volatility'. Our purpose in this presentation is to study the valuation of complex options, to establish the necessary extensions, with respect to the BSM and to investigate the applicability of the BSM as an approximation. We study the volatility behaviour in important practical cases, like the valuation of warrants in equity or levered firms. Sharp and applicable approximations are given. Also, we solve completely the European option case in a large class of non constant volatility and give explicit formulas, which never appeared in the literature before, and constitute a useful extension of the BSM. They are applied to the case of levered firms, with warrants and debts.
Original language | English |
---|---|
Pages (from-to) | 2798-2801 |
Number of pages | 4 |
Journal | Proceedings of the IEEE Conference on Decision and Control |
Volume | 3 |
State | Published - 1994 |
Externally published | Yes |
Event | Proceedings of the 2nd IEEE International Symposium on Requirements Engineering - York, Engl Duration: 27 Mar 1995 → 29 Mar 1995 |