Practical Option Valuations of Futures Contracts with Negative Underlying Prices
A Swishchuk, A Roldan-Contreras, E Soufiani… - arXiv preprint arXiv …, 2020 - arxiv.org
A Swishchuk, A Roldan-Contreras, E Soufiani, G Martinez, M Seifi, N Agrawal, Y Yao
arXiv preprint arXiv:2009.12350, 2020•arxiv.orgHere we propose two alternatives to Black 76 to value European option future contracts in
which the underlying market prices can be negative or mean reverting. The two proposed
models are Ornstein-Uhlenbeck (OU) and continuous time GARCH (generalized
autoregressive conditionally heteroscedastic). We then analyse the values and compare
them with Black 76, the most commonly used model, when the underlying market prices are
positive
which the underlying market prices can be negative or mean reverting. The two proposed
models are Ornstein-Uhlenbeck (OU) and continuous time GARCH (generalized
autoregressive conditionally heteroscedastic). We then analyse the values and compare
them with Black 76, the most commonly used model, when the underlying market prices are
positive
Here we propose two alternatives to Black 76 to value European option future contracts in which the underlying market prices can be negative or mean reverting. The two proposed models are Ornstein-Uhlenbeck (OU) and continuous time GARCH (generalized autoregressive conditionally heteroscedastic). We then analyse the values and compare them with Black 76, the most commonly used model, when the underlying market prices are positive
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