Related papers: Classification of barrier options
In this paper we investigate a class of swing options with firm constraints in view of the modeling of supply agreements. We show, for a fully general payoff process, that the premium, solution to a stochastic control problem, is concave…
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…
Most models for barrier pricing are designed to let a market maker tune the model-implied covariance between moves in the asset spot price and moves in the implied volatility skew. This is often implemented with a local…
We consider options that pay the complexity deficiency of a sequence of up and down ticks of a stock upon exercise. We study the price of European and American versions of this option numerically for automatic complexity, and theoretically…
The introduction of transaction costs into the theory of option pricing could lead not only to the change of return for options, but also to the change of the volatility. On the base of assumption of the portfolio analysis, a new equation…
This article is the second one in a series on the use of scaling invariance in finance. In the first article (cond-mat/9906048), we introduced a new formalism for the pricing of derivative securities, which focusses on tradable objects…
Many important economic outcomes result from the combined effects of several choices, so the best option is not determined from each choice in isolation, but depends on how each choice alters total outcomes. We formally show that narrow…
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 examines a class of barrier options-multi-step barrier options, which can have any finite number of barriers of any level. We obtain a general, explicit expression of option prices of this type under the Black-Scholes model.…
An American option grants the holder the right to select the time at which to exercise the option, so pricing an American option entails solving an optimal stopping problem. Difficulties in applying standard numerical methods to complex…
In this Article, a fast numerical numerical algorithm for pricing discrete double barrier option is presented. According to Black-Scholes model, the price of option in each monitoring date can be evaluated by a recursive formula upon the…
Decision-making methods very often use the technique of comparing alternatives in pairs. In this approach, experts are asked to compare different options, and then a quantitative ranking is created from the results obtained. It is commonly…
Given a finite set of European call option prices on a single underlying, we want to know when there is a market model which is consistent with these prices. In contrast to previous studies, we allow models where the underlying trades at a…
We introduce a general decision tree framework to value an option to invest/divest in a project, focusing on the model risk inherent in the assumptions made by standard real option valuation methods. We examine how real option values depend…
We present a numerical method for the frequent pricing of financial derivatives that depends on a large number of variables. The method is based on the construction of a polynomial basis to interpolate the value function of the problem by…
Accurate option pricing is essential for effective trading and risk management in financial markets, yet it remains challenging due to market volatility and the limitations of traditional models like Black-Scholes. In this paper, we…
We study a market model in which the volatility of the stock may jump at a random time from a fixed value to another fixed value. This model was already described in the literature. We present a new approach to the problem, based on partial…
We study problems with stochastic uncertainty information on intervals for which the precise value can be queried by paying a cost. The goal is to devise an adaptive decision tree to find a correct solution to the problem in consideration…
In this paper, we derive closed-form formulas of first-order approximation for down-and-out barrier and floating strike lookback put option prices under a stochastic volatility model, by using an asymptotic approach. To find the explicit…
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…