Option Pricing, Zero Lower Bound, and COVID-19

Risks

Giacomo Morelli¹  Lea Petrella² 

[1] Department of Statistical Sciences, Sapienza University of Rome, 00185 Rome, Italy;MEMOTEF Department, Sapienza University of Rome, 00161 Rome, Italy;

关键词: option pricing;    Zero Lower Bound;    COVID-19;   

DOI  :  10.3390/risks9090167

来源: DOAJ

【 摘 要 】

This paper provides a quantitative assessment of equity options priced at the Zero Lower Bound, i.e., when interest rates are set essentially to zero. We obtain closed form formulas for American options when the Zero Lower Bound policy holds. We perform numerical implementation of American put options written on the stock Federal National Mortgage Association (FNMA) and of related bounds for the optimal exercise. The results show similarities with the corresponding European options priced at the Zero Lower Bound during the COVID-19 crisis.

【 授权许可】

Unknown