Abstract
The paper studies the effects of changing margin levels on the price of futures options and how to organize a market maker’s position. Black model (1976) becomes a special case of this paper. The paper prices futures options by duplicating them and adopting the theory of Backward Stochastic Differential Equations (BSDEs for short). Furthermore, the price of a futures option is the unique solution to a nonlinear BSDE.
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This research is supported by Postdoctoral Science Foundation of Shanghai under Grant No. 04R214206 and Natural Science Foundation of China under Grant No. 10426022.
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Gu, Y., Li, J. The Effects of Changing Margin Levels on Futures Options Price. Jrl Syst Sci & Complex 19, 461–469 (2006). https://doi.org/10.1007/s11424-006-0461-1
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DOI: https://doi.org/10.1007/s11424-006-0461-1