Related papers: Transformation methods for evaluating approximatio…
Recent years have seen an emerging class of structured financial products based on options linked to dynamic asset allocation strategies. One of the most chosen approach is the so-called target volatility mechanism. It shifts between risky…
This paper performs the numerical analysis and the computation of a Spread option in a market with imperfect liquidity. The number of shares traded in the stock market has a direct impact on the stock's price. Thus, we consider a…
An iterative solution method for fully nonlinear boundary value problems governing self-similar flows with a free boundary is presented. Specifically, the method is developed for application to water entry problems, which can be studied…
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…
Despite significant advancements in machine learning for derivative pricing, the efficient and accurate valuation of American options remains a persistent challenge due to complex exercise boundaries, near-expiry behavior, and intricate…
Consider a discrete finite-dimensional, Markovian market model. In this setting, discretely sampled American options can be priced using the so-called ``non-recombining'' tree algorithm. By successively increasing the number of exercise…
We construct an efficient numerical scheme for solving obstacle problems in divergence form. The numerical method is based on a reformulation of the obstacle in terms of an L1-like penalty on the variational problem. The reformulation is an…
Nowadays many financial derivatives, such as American or Bermudan options, are of early exercise type. Often the pricing of early exercise options gives rise to high-dimensional optimal stopping problems, since the dimension corresponds to…
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…
We consider option hedging in a model where the underlying follows an exponential L\'evy process. We derive approximations to the variance-optimal and to some suboptimal strategies as well as to their mean squared hedging errors. The…
An interacting Black-Scholes model for option pricing, where the usual constant interest rate r is replaced by a stochastic time dependent rate r(t) of the form r(t)=r+f(t) dW/dt, accounting for market imperfections and prices…
We consider a non-stochastic online learning approach to price financial options by modeling the market dynamic as a repeated game between the nature (adversary) and the investor. We demonstrate that such framework yields analogous…
Expanding the ideas of the author's paper 'Nonexpansive maps and option pricing theory' (Kibernetica 34:6 (1998), 713-724) we develop a pure game-theoretic approach to option pricing, by-passing stochastic modeling. Risk neutral…
We present a new view onto the successive approximations' approach in study of the two-point nonlinear fractional boundary value problems. In order to reduce the original problem and further construct its approximate solution we use the…
Quadratic hedging of option payoffs generates the variance optimal martingale measure. When an option features an exercise policy and its cash flows are hedged according to this approach, it may be tempting to optimize such a policy under…
This paper presents a novel and direct approach to price boundary and final-value problems, corresponding to barrier options, using forward deep learning to solve forward-backward stochastic differential equations (FBSDEs). Barrier…
In this paper, we price American-style Parisian down-and-in call options under the Black-Scholes framework. Usually, pricing an American-style option is much more difficult than pricing its European-style counterpart because of the…
The Black-Scholes Option pricing model (BSOPM) has long been in use for valuation of equity options to find the prices of stocks. In this work, using BSOPM, we have come up with a comparative analytical approach and numerical technique to…
The main target of this paper is to present a new and efficient method to solve a nonlinear free boundary mathematical model of atherosclerosis. This model consists of three parabolics, one elliptic and one ordinary differential equations…
In this paper, we investigate an interesting and important stopping problem mixed with stochastic controls and a \textit{nonsmooth} utility over a finite time horizon. The paper aims to develop new methodologies, which are significantly…