History
It appears that the idea was first published in the literature in April 1995 in Management Science by Avi Bick. This paper contained the same idea (including the derivation of the relevant formula) that has since been popularised. In 2007, Société Générale Corporate and Investment Banking (SG CIB) started to market this idea, apparently oblivious of Bick's earlier work in the area. Indisputably, SG CIB popularised it. Since then, most dealers have put in place the technology to offer this sort of option. Assuming the interest rate is zero, Carr and Lee (2010) investigated the pricing and hedging of options on continuous semi-martingales. Li (2008) gave an explicit formula for pricing timer options under the Heston (1993) stochastic volatility model. His result is a natural generalization of Black-Scholes-Merton formula for pricing European options and reconciles with the zero interest rate case in Carr and Lee (2010). An efficient numerical technique is proposed by Bernard and Cui (2011). Li (2008) provides some insight of using the Bessel process with constant drift, which was studied in Linetsky (2004), with drift to characterize the distribution of the so called volatility clock under the celebrated Heston (1993) stochastic volatility model.
Read more about this topic: Timer Call
Famous quotes containing the word history:
“History does nothing; it does not possess immense riches, it does not fight battles. It is men, real, living, who do all this.... It is not “history” which uses men as a means of achieving—as if it were an individual person—its own ends. History is nothing but the activity of men in pursuit of their ends.”
—Karl Marx (1818–1883)
“In history the great moment is, when the savage is just ceasing to be a savage, with all his hairy Pelasgic strength directed on his opening sense of beauty;—and you have Pericles and Phidias,—and not yet passed over into the Corinthian civility. Everything good in nature and in the world is in that moment of transition, when the swarthy juices still flow plentifully from nature, but their astrigency or acridity is got out by ethics and humanity.”
—Ralph Waldo Emerson (1803–1882)
“It is remarkable how closely the history of the apple tree is connected with that of man.”
—Henry David Thoreau (1817–1862)