Option Pricing

Document Type

Article

Publication Date

1-1-2022

Abstract

Call and put options provide a standard tool for hedging exposure to foreseeable risk. The pricing of options is inherently coupled to the price of the underlying asset, hence a model for pricing options must couple innately to the model for the underlying asset price. This chapter details option pricing based upon a so-called double subordination price model for the asset. Subordination models offer the ability to include more of the stylized facts of asset prices, increasing the accuracy of option prices. This chapter details the application of a double subordinated model to capture the mean, variance, skewness, and kurtosis, as well as intrinsic time features of the return process for one of the optimized domestic REIT portfolios.

Publication Title

Dynamic Modeling and Econometrics in Economics and Finance

First Page Number

197

Last Page Number

226

DOI

10.1007/978-3-031-15286-3_12

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