Related papers: Pricing American Options for Jump Diffusions by It…
We investigate the pricing of cliquet options in a jump-diffusion model. The considered option is of monthly sum cap style while the underlying stock price model is driven by a drifted L\'{e}vy process entailing a Brownian diffusion…
An efficient computational algorithm to price financial derivatives is presented. It is based on a path integral formulation of the pricing problem. It is shown how the path integral approach can be worked out in order to obtain fast and…
The paper studies a class of multidimensional optimal stopping problems with infinite horizon for linear switching diffusions. There are two main novelties in the optimal problems considered: the underlying stochastic process has…
We extend the viscosity solution characterization proved in [5] for call/put American option prices to the case of a general payoff function in a multi-dimensional setting: the price satisfies a semilinear re-action/diffusion type equation.…
In this short paper, in order to price occupation-time options, such as (double-barrier) step options and quantile options, we derive various joint distributions of a mixed-exponential jump-diffusion process and its occupation times of…
This paper presents a derivation of the explicit price for the perpetual American put option in the Black-Scholes model, time-capped by the first drawdown epoch beyond a predefined level. We demonstrate that the optimal exercise strategy…
In this note we prove sharp lower error bounds for numerical methods for jump-diffusion stochastic differential equations (SDEs) with discontinuous drift. We study the approximation of jump-diffusion SDEs with non-adaptive as well as…
We study the valuation of an American put option with a random time horizon given by the last exit time of the underlying asset from a fixed level. Since this random time is not a stopping time, the problem falls outside the classical…
We consider a method of lines (MOL) approach to determine prices of European and American exchange options when underlying asset prices are modelled with stochastic volatility and jump-diffusion dynamics. As the MOL, as with any other…
We solve an optimal stopping problem where the underlying diffusion is Brownian motion on $\bf R$ with a positive drift changing at zero. It is assumed that the drift $\mu_1$ on the negative side is smaller than the drift $\mu_2$ on the…
This paper studies regularity property of the value function for an infinite-horizon discounted cost impulse control problem, where the underlying controlled process is a multidimensional jump diffusion with possibly `infinite-activity'…
We propose a method based on continuous time Markov chain approximation to compute the distribution of Parisian stopping times and price Parisian options under general one-dimensional Markov processes. We prove the convergence of the method…
We provide, in a general setting, explicit solutions for optimal stopping problems that involve a diffusion process and its running maximum. Besides, a new feature includes absorbing boundaries that vary with the value of the running…
We derive the optimal investment decision in a project where both demand and investment costs are stochastic processes, eventually subject to shocks. We extend the approach used in Dixit and Pindyck (1994), chapter 6.5, to deal with two…
This paper develops a novel analytically tractable Neumann series of Bessel functions representation for pricing (and hedging) European-style double barrier knock-out options, which can be applied to the whole class of one-dimensional…
We consider the problem of valuation of American (call and put) options written on a dividend paying stock governed by the geometric Brownian motion. We show that the value function has two different but related representations: by means of…
We propose a class of numerical schemes for mixed optimal stopping and control of processes with infinite activity jumps and where the objective is evaluated by a nonlinear expectation. Exploiting an approximation by switching systems,…
This article combines various methods of analysis to draw a comprehensive picture of penalty approximations to the value, hedge ratio, and optimal exercise strategy of American options. While convergence of the penalised solution for…
We suggest a simple reduction of pricing European options in affine jump-diffusion models to pricing options with modified payoffs in diffusion models. The procedure is based on the conjugation of the infinitesimal generator of the model…
In this paper we consider a jump-diffusion dynamic whose parameters are driven by a continuous time and stationary Markov Chain on a finite state space as a model for the underlying of European contingent claims. For this class of processes…