Levy process for jump diffusion model

The Indonesian stock market, especially PT Bank Central Asia (BCA) stock experiences high volatility. Therefore, this research is very important to provide a deeper understanding of the pricing of put and call options as a risk management instrument. This study aims to analyze the pricing of put and call options on PT Bank Central Asia (BCA) shares using the Black-Scholes model and identify factors that affect stock price fluctuations on option prices. This study aims to understand the changes in put and call option prices on PT Bank Central Asia (BCA) shares caused by fluctuations in stock prices. This study uses historical data of PT Bank Central Asia (BCA) shares, volatility, and current interest rates as the basis for analysis. The Black-Scholes method is used as a framework to analyze the pricing of put and call options by considering volatility and interest rates. The results of this study analyze the price changes of put and call options in the face of stock price fluctuations and the factors that affect option prices so as to provide insight into risk management and investment decision making. This research is expected to provide practical guidance for investors and risk managers in making decisions related to put and call options on PT Bank Central Asia (BCA) shares.

The binomial formula given by Cox, Ross and Rubinstein (1979) is a tool for valuating the call option price. It is well known that the price from binomial formula converges to the price from Black-Scholes formula which was given by Black, Scholes and Merton (1973) as the number of periods (n) converges to infinity. In 1988, Boyle introduced the trinomial formula which is another tool for calculating call option price. He considered the trinomial formula in the case that the rising rate of a stock price is u = e λσ√T n and the falling rate of the stock price is d = u −1 , where T is maturity time, σ is volatility and λ > 1. After that, Entit et al. (2013) gave examples which show that the call option price from trinomial formula is closed to the call option price from the Black-Scholes formula. In this thesis, we give the rigorous proof of this conjecture by showing that the trinomial formula converges to the Black-Scholes formula. Moreover, we prove that the rate of this convergence is 1 √ n .

PurposeA small literature has shown that individual wellbeing varies with the price of company stock, but it is unclear whether this is due to wealth effects amongst those holding stock, or more general effects on sentiment, with individuals taking rising stock prices as an indicator of improvements in the economy. The authors contribute to this literature by using two data sets to establish the relationship between share prices on the one hand and worker wellbeing on the other.Design/methodology/approachFirst, the authors use over 20 years of British panel data to show that employee happiness and job satisfaction moves with share prices among those whose pay is partly determined by company fortunes. The authors then examine share price movements and employee stock holding in a single corporation and provide suggestive evidence that an increase in the firm’s stock price increases the well-being of those who belong to its employee share purchase plan (ESPP). These effects are greatest among those making the largest monthly contributions to the program who have the most to gain (or lose) from stock price fluctuations. There is also tentative evidence that the well-being effects of a higher share price are larger for those who hold more shares. Taken together these results suggest that, although stock price movements have little effect on well-being in the population at large, the well-being of those holding stock in their own company rises when the price of that stock is higher, suggesting the effects of share prices work at least partly via changes in wealth.FindingsTaken together these results suggest that the wellbeing effects of share prices work at least partly via changes in wealth.Research limitations/implicationsThe authors cannot be certain that the job satisfaction movements they see are causally linked to share plan participation and bonus receipt. Future research might fruitfully examine the mechanisms at play, and whether the effects identified here are linked to differences in employee motivation and effort over the business cycle.Practical implicationsFirms may wish to consider the appropriateness of linking their workers’ pay to firm performance through share plans or profit shares to establish whether this improves worker wellbeing.Social implicationsThe utility of workers may increase where firms offer some compensation via a share plan or profit share.Originality/valueThe literature suggests a link between share price movements and worker wellbeing, but the reasons for the link are contested. Using two very different data sources, the authors are able to show that share price increases induce higher worker wellbeing, at least in part, through wealth effects.

Volumetric Risk Hedging Strategies and Basis Risk Premium for Solar Power

Investment is a saving activity with the aim of overcoming price increases or often called inflation. Investments can be in the form of gold, property, silver or stock investments. Stock investment is considered more profitable than just saving at a bank. Currency values are declining due to inflation. This results in a tendency to invest in shares. Stock investment carries a great risk. Therefore, in 2004 stock options began to trade. Stock options are contracts that give the holder the right to buy / sell shares at the agreed time, at a certain price. Stock option prices tend to be cheaper than stock prices. Therefore, determining the right price of stock options is needed. In this study, we will focus on the European type of buying options, the right to buy shares at an agreed price at maturity. The purpose of this study is the completion of the Black-Scholes model of European type option prices at a constant market, assuming stock movements meet the stochastic differential equation, fixed risk-free interest rates, companies distributing dividends, no taxes, no transaction costs, and free market arbitration. The results of this research are in the form of differential equations and the settlement of the Black-Scholes model of European type call option prices, and a case study used by stock option contracts with a maturity of January 4, 2010, PT Aqua Golden Mississippi Tbk.

The Information Content of The Implied Volatility Surface: Can Option Prices Predict Jumps?

We present option pricing under the double stochastic volatility model with stochastic interest rates and double exponential jumps with stochastic intensity in this article. We make two contributions based on the existing literature. First, we add double stochastic volatility to the option pricing model combining stochastic interest rates and jumps with stochastic intensity, and we are the first to fill this gap. Second, the stochastic interest rate process is presented in the Hull–White model. Some authors have concentrated on hybrid models based on various asset classes in recent years. Therefore, we build a multifactor model with the term structure of stochastic interest rates. We also approximated the pricing formula for European call options by applying the COS method and fast Fourier transform (FFT). Numerical results display that FFT and the COS method are much faster than the numerical integration approach used for obtaining the semi-closed form prices. The COS method shows higher accuracy, efficiency, and stability than FFT. Therefore, we use the COS method to investigate the impact of the parameters in the stochastic jump intensity process and the existence of the process on the call option prices. We also use it to examine the impact of the parameters in the interest rate process on the call option prices.

In the financial world, the thing that is interesting for investors today is to predict a reasonable Asian Call Option price that does not cause the seller or buyer of the option to experience losses. The constant interest assumption is more often used by previous research as an assumption in predicting the price of Asian Call Options. This is not in line with the fact that interest rate movements are not constant. The use of incorrect assumptions will affect the accuracy of prediction results. In overcoming this problem, this study aims to predict the price of Asian Call Options with non-constant interest rates using Monte Carlo simulation. The non-constant interest rate model used is Cox-Ingersoll-Ross (CIR) because this model produces positive interest rates. This study begins with a screening of Normally distributed interest rate data. The data is used to determine the parameters of the CIR interest rate model. Next, an Asian Call Option price simulation with non-constant interest rates was carried out and ended by analyzing a graph of the Asian Call Option price simulation results with non-constant interest rates. The simulated price result of the Asian Call Option with non-constant interest rates converged at the value of $170.82. Based on the price chart of Asian Call Options with different strike prices, the larger the strike price causes, the larger the Asian Call Option price, which corresponds to the price characteristics of the Asian Call Option. In addition, by extending the maturity period, the price of Asian Call Options with non-constant interest rates is greater according to the price characteristics of Asian Call Options.

In the investment world, investment decisions are important in determining future investment success. In capital market activities, stock prices are a very important factor and need to be considered by investors because stock prices show the performance of the issuer. One of them is a mining company in Indonesia. The stock price also shows the value of the company, with the higher the stock price of a company, the higher the value of the company and vice versa. Return On Assets (ROA) is a ratio of profitability that shows the result (return) on the total assets used in the Company. The current ratio (CR) is a liquidity ratio that compares the company's current assets with the company's current liabilities. Earnings per share (EPS) is an important indicator in fundamental stock analysis, which describes how much profit a company generates for each share owned by an investor. This study uses regression analysis which aims to determine the effect of variable performance, at least in terms of ROA, does not affect the value of the company's shares in the time period studied. The Current Ratio (CR) also does not affect the share price of mining companies on the Indonesia Stock Exchange in the 2020–2022 period. This means that the company's liquidity level as measured by CR does not significantly affect the company's share price in the market. In the mining industry listed on the Indonesia Stock Exchange in the 2020–2022 period, earnings per share (EPS) does not affect the effect of Return On Assets (ROA) on stock prices. In other words, a change in a company's EPS does not change how ROA affects its share price. Earning Per Share (EPS) is also not able to moderate the influence of the Current Ratio (CR) on share prices in the mining industry which are listed on the Indonesia Stock Exchange in the 2020–2022 period. This means that a change in a company's EPS does not change the way CR affects the company's stock price.

The food and beverage sector is the most important element for survival because it included one of the needs that must be met, so that this sector is easy to experience sustainable growth. The studies aimed to anatomize the influence of return on asset, debt to equity ratio, and total asset turnover that influence the enterprise value with share price as an mediation variable at food and beverage enterprise listed at the Indonesia Stock Exchange in 2018-2021. This research is a quantitative research. The population in this research is all enterprise in the food and beverage enterprise listed at the Indonesia Stock Exchange in 2018-2021 into 72 companies . Sampling in this studies used purposive sampling which obtained samples into 10 companies. The result of the analyze use the smart partial least square (PLS) 3.0 software, show the return on asset has a significant influence on share price, debt to equity ratio has a significant influence on share price, total asset turnover has no significant influence on share price, return on asset has a significant influence on enterprise value, debt to equity ratio has a significant influence on enterprise value, total asset turnover has a significant influence on enterprise value, and stock price has a significant influence on enterprise value. The yield of the indirect effect hypothesis test show that return on assets has a negative and significant influence on enterprise value through share price, debt to equity ratio has a negative and significant influence on enterprise value through share price, and total asset turnover has no significant influence on enterprise value through share price.

Call option prices in the Black–Scholes model, viewed as functions of strike and maturity, are totally positive of order two (), meaning that the price ratio of a higher‐strike call to a lower‐strike call increases with maturity, with adjustments for dividends and interest. We develop conditions for this property in other models and contrast it with full total positivity, which holds only for out‐of‐the‐money strikes in the Black–Scholes model. Related properties apply to puts. We give a simple sufficient condition for based on the unimodality of ratios of densities of the underlying asset at different dates. We show that the property entails a strengthening of monotonicity of the underlying asset in the convex order and thus a strengthening of the absence of static arbitrage. We construct examples illustrating the gaps between these properties. We develop connections between and the shape of the implied volatility surface—in particular, connections with supermodularity of implied variance, a condition implying that lines of implied variance for different maturities fan out at high strikes. An examination of S&P 500 options market data indicates that violations are infrequent and typically reverse quickly.

We introduce a hybrid stochastic volatility model where the asset price process follows the Heston model and interest rates are governed by a two-factor stochastic model. Two cases are considered. First, it is assumed that interest rates and asset prices are uncorrelated. The characteristic function method is used to derive semi-analytical pricing formulae for plain vanilla options. In the second case we introduce a correlation between the asset price process and the short rate process and use Monte Carlo simulations for pricing options. To reduce the stochastic error, we implement the control variate method where an estimator of the option value for the uncorrelated case is used as a control variate. The options are priced with a varying correlation coefficient. We observe that the control variate method allows us to speed up Monte Carlo computations by a factor with the magnitude of several hundreds. The efficiency of the method is higher for smaller values of the correlation coefficient. We then study the impact a correlation between the two processes has on option prices. It has been noticed that the call option price is an increasing function of the correlation coefficient.

PurposeThe purpose of this research is to determine the nature of the relationship between sporting, financial performance and a stock price of football clubs by adopting the quarterly financial statements of the European clubs that represent the research sample: Juventus, Borussia Dortmund and Olympique Lyonnais, which helps clubs’ managers in evaluating the sporting and financial performance effect on the share price at the quarterly level.Design/methodology/approachThe research is performed using the panel data technique, for Juventus, Borussia Dortmund and Olympique Lyonnais (2007–2016). The sporting performance is represented by the quarterly rate of the number of goals scored by the club to the number of goals scored against it; the quarterly rate of the number of wins to the total number of matches played by the club in local and international competitions. At the same time, financial performance is represented by the quarterly rate of current ratio, the quarterly rate of the leverage ratio, and the quarterly rate of earnings per share (EPS).FindingsThe analysis of the results was distributed at two levels: macro and micro. The analysis at the macro-level dealt with the correlation and influence between the sports performance indicators and the financial performance indicators of the three clubs combined on the share prices of those clubs. The micro-level performance is analyzed separately from the macro analysis. The results indicated that there was an effect on macro analysis. As for the microanalysis, the results showed no effect of the sporting performance of the three clubs on their share price.Research limitations/implicationsThe main implications of this research reveal the weakness of the correlation between the clubs' share price in the financial market, possibly due to the quarterly rate of the data. But there is a slight change for Juventus. There is a moderate correlation between the quarterly sporting performance indicators of this club and the quarterly average of its share price in the market.Practical implicationsThe main implications of this research reveal the weakness of the correlation between the clubs' share price in the financial market, possibly due to the quarterly rate of the data. But there is a slight change for Juventus. There is a moderate correlation between the quarterly sporting performance indicators of this club and the quarterly average of its share price in the market.Social implicationsThe social implications of the current research are clear by dealing with the relationship between the sports and Financial performance of football clubs and its relationship to the price of its shares in the financial market. The success of football clubs in achieving sporting victory attracts more fans. This leads to an increase in the club's profits and consequently to an increase in the price of its shares in the financial markets. Therefore, the societal benefit will be achieved by increasing the enjoyment of the audience and increasing the revenues of the club and the city to which it belongs.Originality/valueThe originality of this research is represented in its use of quarterly data to clarify the relationship between the sporting and financial performance of a sample of European football clubs with the price of its shares in the financial markets. Therefore, this research differs from previous research that used only daily and annual data for clubs to clarify the relationship between their sporting and financial performance.

The object of this research is primary consumer sector companies registered on the IDX, where the data is in the form of financial reports for the 2019-2023 period. The research method that is appropriate for this research is associative research because the author wants to know the influence of the Current Ratio, debt-to-asset ratio, and Net Profit Margin variables on stock prices with company value as an intervening variable. In this research, the operational variable is the stock price. (Z) as the dependent variable, company value (Y) as the intervening variable, while the independent variables are Current Ratio (X1), Debt to Asset Ratio (X2), and Net Profit Margin (X3). The indicators for share prices are closing prices; company value is price to book value; current ratio is current assets and current liabilities; debt to asset ratio is total debt and total assets; net profit is profit after taxes and sales. Based on the criteria for determining the sample size, 59 primary consumer sector companies meet these criteria. The following conclusions can be obtained: 1. The Current Ratio and net profit margin have a negative and insignificant effect on company value; 2. The Debt-to-Asset Ratio positively and significantly affects company value; 3. Net Profit Margin has a negative and insignificant effect on company value; 4. The Current Ratio has a positive but insignificant effect on share prices; 5. The Debt-to-Asset Ratio negatively and significantly affects share prices; 6. Net Profit Margin has a negative and insignificant effect on share prices, 7. Company value has a positive and significant effect on share prices

Geopolitical tensions especially those occurring in the Middle East, have significantly impacted the world economy. This impact was also felt by the Indonesian state, which impacted company share prices which experienced a decline due to geopolitical tensions, including the banking sector. Apart from geopolitical tensions, several other factors, such as the company's fundamental factors, also influenced the decline in share prices. Fundamental factors play an important role in determining a company's share price. These factors refer to various elements and variables that reflect the company's financial condition, operations, and prospects. So quite a few investors use fundamental analysis to assess whether current share prices reflect the company's true intrinsic value. This study seeks to reassess the elements affecting banking share prices by incorporating macroeconomic control variables related to these concerns to enhance the robustness of the findings. Utilizing a quantitative approach through panel data regression, the research focuses on banks listed on the Indonesia Stock Exchange from 2019 to 2023, with a sample of 16 companies meeting the selection criteria. The results reveal that Debt Equity Ratio (DER), Return On Assets (ROA), Return On Equity (ROE), GDP, inflation, and exchange rates collectively have a positive and significant impact on stock prices. However, when analyzed individually, only ROE and exchange rates show a significant effect, while DER, ROA, GDP, and inflation do not.