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In this paper, we investigate the existence of nontrivial weak solutions for the Prandtl-Batchelor type free boundary value elliptic problem driven by a power nonlinearity. The algebraic topology approach will be used to establish the…
The present article provides an efficient and accurate hybrid method to price American standard options in certain jump-diffusion models as well as American barrier-type options under the Black & Scholes framework. Our method generalizes…
In this work we present an analytical model, based on the path-integral formalism of Statistical Mechanics, for pricing options using first-passage time problems involving both fixed and deterministically moving absorbing barriers under…
Semi-analytical pricing of American options in a time-dependent Ornstein-Uhlenbeck model was presented in [Carr, Itkin, 2020]. It was shown that to obtain these prices one needs to solve (numerically) a nonlinear Volterra integral equation…
A nonlinear wave alternative for the standard Black-Scholes option-pricing model is presented. The adaptive-wave model, representing 'controlled Brownian behavior' of financial markets, is formally defined by adaptive nonlinear…
We study the barrier that gives the optimal time to exercise an American option written on a time-dependent Ornstein--Uhlenbeck process, a diffusion often adopted by practitioners to model commodity prices and interest rates. By framing the…
The main purpose of this article is to give a general overview and understanding of the first widely used option-pricing model, the Black-Scholes model. The history and context are presented, with the usefulness and implications in the…
In a transformation method, the numerical solution of a given boundary value problem is obtained by solving one or more related initial value problems. Therefore, a transformation method, like a shooting method, is an initial value method.…
In this paper, a new numerical method based on adaptive gradient descent optimizers is provided for computing the implied volatility from the Black-Scholes (B-S) option pricing model. It is shown that the new method is more accurate than…
It is well-known that the Black-Scholes formula has been derived under the assumption of constant volatility in stocks. In spite of evidence that this parameter is not constant, this formula is widely used by financial markets. This paper…
This work investigates the application of the Newton's method for the numerical solution of a nonlinear boundary value problem formulated through an ordinary differential equation (ODE). Nonlinear ODEs arise in various mathematical modeling…
Subdiffusion is a well established phenomenon in physics. In this paper we apply the subdiffusive dynamics to analyze financial markets. We focus on the financial aspect of time fractional diffusion model with moving boundary i.e. American…
We consider a generic market model with a single stock and with random volatility. We assume that there is a number of tradable options for that stock with different strike prices. The paper states the problem of finding a pricing rule that…
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…
We consider shape optimization problems for general integral functionals of the calculus of variations that may contain a boundary term. In particular, this class includes optimization problems governed by elliptic equations with a Robin…
Option pricing theory, such as the Black and Scholes (1973) model, provides an explicit solution to construct a strategy that perfectly hedges an option in a continuous-time setting. In practice, however, trading occurs in discrete time and…
In this study we prove the existence of statistical arbitrage opportunities in the Black-Scholes framework by considering trading strategies that consists of borrowing from the risk free rate and taking a long position in the stock until it…
In the first part of this thesis, we focus on American options in the Heston model. We first give an analytical characterization of the value function of an American option as the unique solution of the associated (degenerate) parabolic…
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…
Linearisation is often used as a first step in the analysis of nonlinear initial boundary value problems. The linearisation procedure frequently results in a confusing contradiction where the nonlinear problem conserves energy and has an…