Related papers: Smart expansion and fast calibration for jump diff…
We present closed analytical approximations for the pricing of basket options, also applicable to Asian options with discrete averaging under the Black-Scholes model with time-dependent parameters. The formulae are obtained by using a…
An important but rarely-addressed option pricing question is how to choose appropriate strikes for implied volatility inputs when pricing more exotic multi-asset derivatives. By means of Malliavin Calculus we construct an optimal log-linear…
We develop a technique based on Malliavin-Bismut calculus ideas, for asymptotic expansion of dual control problems arising in connection with exponential indifference valuation of claims, and with minimisation of relative entropy, in…
We introduce a numerical method for the approximation of functions which are analytic on compact intervals, except at the endpoints. This method is based on variable transforms using particular parametrized exponential and…
This paper demonstrates the efficiency of using Edgeworth and Gram-Charlier expansions in the calibration of the Libor Market Model with Stochastic Volatility and Displaced Diffusion (DD-SV-LMM). Our approach brings together two research…
We derive a small-time expansion for out-of-the-money call options under an exponential Levy model, using the small-time expansion for the distribution function given in Figueroa-Lopez & Houdre (2009), combined with a change of num\'eraire…
We present a study of the short-maturity asymptotics for VIX and European option prices in local-stochastic volatility models with compound Poisson jumps. Both out-of-the-money (OTM) and at-the-money (ATM) asymptotics are considered. The…
We introduce a flexible method to simultaneously infer both the drift and volatility functions of a discretely observed scalar diffusion. We introduce spline bases to represent these functions and develop a Markov chain Monte Carlo…
We analyze the empirical performance of several non-parametric estimators of the pricing functional for European options, using historical put and call prices on the S&P500 during the year 2012. Two main families of estimators are…
Based on the concept of self-decomposable random variables we discuss the application of a model for a pair of dependent Poisson processes to energy facilities. Due to the resulting structure of the jump events we can see the…
We price European-style options written on forward contracts in a commodity market, which we model with an infinite-dimensional Heath-Jarrow-Morton (HJM) approach. For this purpose we introduce a new class of state-dependent volatility…
Score-based diffusion generative models have recently emerged as a powerful tool for modelling complex data distributions. These models aim at learning the score function, which defines a map from a known probability distribution to the…
We study the behavior of the critical price of an American put option near maturity in the Jump diffusion model when the underlying stock pays dividends at a continuous rate and the limit of the critical price is smaller than the stock…
The implied volatility skew has received relatively little attention in the literature on short-term asymptotics for financial models with jumps, despite its importance in model selection and calibration. We rectify this by providing…
We present a simple, fast, and accurate method for pricing a variety of discretely monitored options in the Black-Scholes framework, including autocallable structured products, single and double barrier options, and Bermudan options. The…
This work develops Monte Carlo Euler adaptive time stepping methods for the weak approximation problem of jump diffusion driven stochastic differential equations. The main result is the derivation of a new expansion for the omputational…
We deal with the calculation of price sensitivities for stochastic volatility models. General forms for the dynamics of the underlying asset price and its volatility are considered. We make use of the chaotic (or Malliavin) calculus to…
Extracting implied information, like volatility and/or dividend, from observed option prices is a challenging task when dealing with American options, because of the computational costs needed to solve the corresponding mathematical problem…
In this paper, we price European Call three different option pricing models, where the volatility is dynamically changing i.e. non constant. In stochastic volatility (SV) models for option pricing a closed form approximation technique is…
Recognizing the importance of jump risk in option pricing, we propose a neural jump stochastic differential equation model in this paper, which integrates neural networks as parameter estimators in the conventional jump diffusion model. To…