Related papers: High-order accurate implicit methods for the prici…
We use a continuous version of the standard deviation premium principle for pricing in incomplete equity markets by assuming that the investor issuing an unhedgeable derivative security requires compensation for this risk in the form of a…
Assuming that price of the underlying stock is moving in range bound, the Black-Scholes formula for options pricing supports a separation of variables. The resulting time-independent equation is solved employing different behavior of the…
We introduce a novel signature approach for pricing and hedging path-dependent options with instantaneous and permanent market impact under a mean-quadratic variation criterion. Leveraging the expressive power of signatures, we recast an…
Options on baskets (linear combinations) of assets are notoriously challenging to price using even the simplest log-normal continuous-time stochastic models for the individual assets. The paper [5] gives a closed form approximation formula…
We present high-order compact schemes for a linear second-order parabolic partial differential equation (PDE) with mixed second-order derivative terms in two spatial dimensions. The schemes are applied to option pricing PDE for a family of…
An efficient conditioning technique, the so-called Brownian Bridge simulation, has previously been applied to eliminate pricing bias that arises in applications of the standard discrete-time Monte Carlo method to evaluate options written on…
In this article, we design and analyze a Hybrid High-Order (HHO) finite element approximation for a class of strongly nonlinear boundary value problems. We consider an HHO discretization for a suitable linearized problem and show its…
This note proposes a method for pricing high-dimensional American options based on modern methods of multidimensional interpolation. The method allows using sparse grids and thus mitigates the curse of dimensionality. A framework of the…
We develop a novel deep learning approach for pricing European options in diffusion models, that can efficiently handle high-dimensional problems resulting from Markovian approximations of rough volatility models. The option pricing partial…
This study addresses the interpretable estimation of price bounds in the context of price optimization. In recent years, price-optimization methods have become indispensable for maximizing revenue and profits. However, effective application…
This paper presents a novel approach to optimizing profit margins in non-life insurance markets through a gradient descent-based method, targeting three key objectives: 1) maximizing profit margins, 2) ensuring conversion rates, and 3)…
This paper presents a new model for options pricing. The Black-Scholes-Merton (BSM) model plays an important role in financial options pricing. However, the BSM model assumes that the risk-free interest rate, volatility, and equity premium…
We consider the computation of model-free bounds for multi-asset options in a setting that combines dependence uncertainty with additional information on the dependence structure. More specifically, we consider the setting where the…
We propose a fourth--order compact finite--difference (HOC--FD) scheme for the transformed Bates partial integro--differential equation (PIDE). The method employs an implicit--explicit (IMEX) Crank--Nicolson framework for local terms and…
Solving optimal stopping problems by backward induction in high dimensions is often very complex since the computation of conditional expectations is required. Typically, such computations are based on regression, a method that suffers from…
The robust option pricing problem is to find upper and lower bounds on fair prices of financial claims using only the most minimal assumptions. It contrasts with the classical, model-based approach and gained prominence in the wake of the…
In this work, we present a quantum algorithm designed to solve the differential equation used in the pricing of Asian options, in the framework of the Black-Scholes model. Our approach modifies an existing quantum pre-conditioning method…
Advertising options have been recently studied as a special type of guaranteed contracts in online advertising, which are an alternative sales mechanism to real-time auctions. An advertising option is a contract which gives its buyer a…
By employing non-equispaced grid points near boundaries, boundary-optimized upwind finite-difference operators of orders up to nine are developed. The boundary closures are constructed within a diagonal-norm summation-by-parts (SBP)…
We study indifference pricing of exotic derivatives by using hedging strategies that take static positions in quoted derivatives but trade the underlying and cash dynamically over time. We use real quotes that come with bid-ask spreads and…