Trees from history

Volatility smile models and their variants are the preferred pricing method for dealers working within the risk-neutral world. However, such models use option prices as input parameters, making them less useful for assessing fair value. Risk-neutralised historical distributions were devised to address the problem, and here Nusret Cakici and Kevin Foster show how to apply this approach within an implied tree framework, with application to American-style option pricing

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What gold's rise means for rates, equities

It has been several years since we have seen volatility in gold. An increase in gold volatility can typically be associated with a change in sentiment and investor behavior. The precious metal has surged this year on increased demand for safe haven…

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