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:
“The history of every country begins in the heart of a man or a woman.”
—Willa Cather (1876–1947)
“The thing that struck me forcefully was the feeling of great age about the place. Standing on that old parade ground, which is now a cricket field, I could feel the dead generations crowding me. Here was the oldest settlement of freedmen in the Western world, no doubt. Men who had thrown off the bands of slavery by their own courage and ingenuity. The courage and daring of the Maroons strike like a purple beam across the history of Jamaica.”
—Zora Neale Hurston (1891–1960)
“There is a history in all men’s lives,
Figuring the natures of the times deceased,
The which observed, a man may prophesy,
With a near aim, of the main chance of things
As yet not come to life.”
—William Shakespeare (1564–1616)