Related papers: Approximate formulae for pricing zero-coupon bonds…
We consider high-dimensional asset price models that are reduced in their dimension in order to reduce the complexity of the problem or the effect of the curse of dimensionality in the context of option pricing. We apply model order…
We consider in this paper some structured financial products, known as reverse convertible notes, that resulted in substantial losses to certain buyers of these notes in recent years. We shall focus on specific reverse convertible notes…
The authors present a new simple algorithm to approximate weakly stochastic differential equations in the spirit of [1] and [2]. They apply it to the problem of pricing Asian options under the Heston stochastic volatility model, and compare…
This paper proposes a Monte Carlo technique for pricing the forward yield to maturity, when the volatility of the zero-coupon bond is known. We make the assumption of deterministic default intensity (Hazard Rate Function). We make no…
We discuss a simple extension of the Ho and Lee model with generic time-dependent drift in which: 1) we compute bond prices analytically; 2) the yield curve is sensible and the asymptotic yield is positive; and 3) our analytical solution…
The paper introduces benchmark-neutral pricing and hedging for long-term contingent claims. It employs the growth optimal portfolio of the stocks as numeraire and the new benchmark-neutral pricing measure for pricing. For a realistic…
Cryptocurrency lending pools are services that allow lenders to pool together assets in one cryptocurrency and loan it out to borrowers who provide collateral worth more (than the loan) in a separate cryptocurrency. Borrowers can repay…
The aim of this paper is to investigate the use of close formula approximation for pricing European mortgage options. Under the assumption of logistic duration and normal mortgage rates the underlying price at the option expiry is…
We consider compound geometric approximation for a nonnegative, integer-valued random variable $W$. The bound we give is straightforward but relies on having a lower bound on the failure rate of $W$. Applications are presented to M/G/1…
Given a system of analytic functions and an approximate zero, we introduce inflation to transform this system into one with a regular quadratic zero. This leads to a method for isolating a cluster of zeros of the given system.
The paper proposes an approximate expression for calculating very complex one-dimensional integrals depending on the parameter $a$. These integrals often occur in computational problems theory of magnetic solitons. The resulting analytical…
We give a simple algorithm to incorporate the effects of resets in convertible bond prices, without having to add an extra factor to take into account the value of the reset. Furthermore we show that the effect of a notice period, and…
We present weak approximations schemes of any order for the Heston model that are obtained by using the method developed by Alfonsi and Bally (2021). This method consists in combining approximation schemes calculated on different random…
We consider closed-form approximations for European put option prices within the Heston and GARCH diffusion stochastic volatility models with time-dependent parameters. Our methodology involves writing the put option price as an expectation…
High precision analytical approximation is proposed for variance-covariance based risk allocation in a portfolio of risky assets. A general case of a single-period multi-factor Merton-type model with stochastic recovery is considered. The…
We provide a critical analysis of the proof of the fundamental theorem of asset pricing given in the paper "Arbitrage and approximate arbitrage: the fundamental theorem of asset pricing" by B. Wong and C.C. Heyde (Stochastics, 2010) in the…
In this paper we consider the pricing of options on interest rates such as caplets and swaptions in the L\'evy Libor model developed by Eberlein and \"Ozkan (2005). This model is an extension to L\'evy driving processes of the classical…
In this article, we consider a 2 factors-model for pricing defaultable bond with discrete default intensity and barrier where the 2 factors are stochastic risk free short rate process and firm value process. We assume that the default event…
This study deals with the problem of pricing compound options when the underlying asset follows a mixed fractional Brownian motion with jumps. An analytic formula for compound options is derived under the risk neutral measure. Then, these…
Some expansion methods have been proposed for approximately pricing options which has no exact closed formula. Benhamou et al. (2010) presents the smart expansion method that directly expands the expectation value of payoff function with…