Università della Svizzera italiana

Barrier option pricing using adjusted transition probabilities

Barone-Adesi, Giovanni ; Fusari, Nicola ; Theal, John

In: The journal of derivatives, 2008, vol. 16, no. 2, p. 36-53

In the existing literature on barrier options much effort has been exerted to ensure convergence through placing the barrier in close proximity to, or directly onto, the nodes of the tree lattice. For a variety of barrier option types we show that such a procedure may not be a necessary prerequisite to achieving accurate option price approximations. Using the Kamrad and Ritchken (1991)...

Università della Svizzera italiana

On the lease rate, the convenience yield and speculative effects in the gold futures market

Theal, John ; Barone Adesi, Giovanni (Dir.) ; Geman, Hélyette (Codir.)

Thèse de doctorat : Università della Svizzera italiana, 2009 ; 2009ECO005.

By examining the gold leasing market and employing data on the gold forward offered rate (GOFO) and derived lease rates, we propose that rather than using the interest-adjusted basis as a proxy for the convenience yield of gold, the convenience yield is better approximated by the derived gold lease rate. Additionally, using the interest-adjusted basis as opposed to the lease rate can lead to...