Related papers: Classification of barrier options
We consider the problem of approximation of density functions which is important in the theory of pricing of basket options. Our method is well adopted to the multidimensional case. Observe that implementations of polynomial and spline…
The approach that allows find European option price on the assumption of hedging at discrete times is proposed. The routine allows find the option price not for lognormal distribution functions of underlying asset only but for wide enough…
In this paper, we demonstrate that policy iteration, introduced in the context of HJB equations in [Forsyth & Labahn, 2007], is an extremely simple generic algorithm for solving linear complementarity problems resulting from the finite…
This paper initiates a study into the century-old issue of market predictability from the perspective of computational complexity. We develop a simple agent-based model for a stock market where the agents are traders equipped with simple…
Machine learning is central to empirical asset pricing, but portfolio construction still relies on point predictions and largely ignores asset-specific estimation uncertainty. We propose a simple change: sort assets using…
The combinatorial optimization problem is one of the important applications in neural network computation. The solutions of linearly constrained continuous optimization problems are difficult with an exact algorithm, but the algorithm for…
This paper considers the pricing of long-term options on assets such as housing, where either government intervention or the economic nature of the asset is assumed to limit large falls in prices. The observed asset price is modelled by a…
This paper mainly discusses the American option's hedging strategies via binomialmodel and the basic idea of pricing and hedging American option. Although the essential scheme of hedging is almost the same as European option, small…
Techniques for decision making with knowledge of linear constraints on condition probabilities are examined. These constraints arise naturally in many situations: upper and lower condition probabilities are known; an ordering among the…
This paper presents a new asymptotic expansion method for pricing continuously monitoring barrier options. In particular, we develops a semi-group expansion scheme for the Cauchy-Dirichlet problem in the second-order parabolic partial…
An agent-based model for financial markets has to incorporate two aspects: decision making and price formation. We introduce a simple decision model and consider its implications in two different pricing schemes. First, we study its…
The choice of the parameter value for regularized inverse problems is critical to the results and remains a topic of interest. This article explores a criterion for selecting a good parameter value by maximizing the probability of the data,…
We consider the superhedging price of an exotic option under nondominated model uncertainty in discrete time in which the option buyer chooses some action from an (uncountable) action space at each time step. By introducing an enlarged…
Calibration, the practice of choosing the parameters of a structural model to match certain empirical moments, can be viewed as minimum distance estimation. Existing standard error formulas for such estimators require a consistent estimate…
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…
An important issue in concurrency is interference. This issue manifests itself in both shared-variable and communication-based concurrency --- this paper focusses on the former case where interference is caused by the environment of a…
The problem of determining the European-style option price in the incomplete market has been examined within the framework of stochastic optimization. An analytic method based on the discrete dynamic programming equation (Bellman equation)…
We consider the discretized Bachelier model where hedging is done on an equidistant set of times. Exponential utility indifference prices are studied for path-dependent European options and we compute their non-trivial scaling limit for a…
Warrants with stock price dependent threshold conditions give the right to buy specially issued stocks, if the performance of the stock price satisfies some requirements. Existence of these derivatives changes the price process of the…
In this paper, we study a retailer price optimization problem which includes the practical constraints: maximum number of price changes and minimum amount of price change (if a change is recommended). We provide a closed-form formula for…