Related papers: Classification of barrier options
We consider economic obstacles that limit the reliability and accuracy of value-at-risk (VaR). Investors who manage large market transactions should take into account the impact of the randomness of large trade volumes on predictions of…
Thanks to the high potential for profit, trading has become increasingly attractive to investors as the cryptocurrency and stock markets rapidly expand. However, because financial markets are intricate and dynamic, accurately predicting…
This paper starts by defining the criteria where the early-exercise of an American option is never optimal, under positive, or negative rates. It follows with a short analysis of the various shapes of the exercise region under negative…
We propose an innovative data-driven option pricing methodology that relies exclusively on the dataset of historical underlying asset prices. While the dataset is rooted in the objective world, option prices are commonly expressed as…
The variance gamma model is a widely popular model for option pricing in both academia and industry. In this paper, we provide a new perspective for pricing European style options for the variance gamma model by deriving closed-form…
We develop a new analysis for portfolio optimisation with options, tackling the three fundamental issues with this problem: asymmetric options' distributions, high dimensionality and dependence structure. To do so, we propose a new…
Option written on several foreign exchange rates (FXRs) depends on correlation between the rates. To evaluate the option, historical estimates for correlations can be used but usually they are not stable. More significantly, pricing of the…
Reliability Options are capacity remuneration mechanisms aimed at enhancing security of supply in electricity systems. They can be framed as call options on electricity sold by power producers to System Operators. This paper provides a…
The Pandora's Box problem models the search for the best alternative when evaluation is costly. In the simplest variant, a decision maker is presented with $n$ boxes, each associated with a cost of inspection and a hidden random reward. The…
We study the optimal mechanism design problem faced by a market intermediary who makes revenue by connecting buyers and sellers. We first show that the optimal intermediation protocol has substantial structure: it is the solution to an…
This paper studies how to price and hedge options under stock models given as a path-dependent SDE solution. When the path-dependent SDE coefficients have Fr\'{e}chet derivatives, an option price is differentiable with respect to time and…
This paper considers possible price paths of a financial security in an idealized market. Its main result is that the variation index of typical price paths is at most 2, in this sense, typical price paths are not rougher than typical paths…
Consider the problem of pricing options on forwards in energy markets, when spot prices follow a geometric multi-factor model in which several rates of mean reversion appear. In this paper we investigate the role played by slow mean…
The accuracy of least squares calibration using option premiums and particle filtering of price data to find model parameters is determined. Derivative models using exponential L\'evy processes are calibrated using regularized weighted…
We consider the problem of inference for parameters selected to report only after some algorithm, the canonical example being inference for model parameters after a model selection procedure. The conditional correction for selection…
In this work we study the optimal execution problem with multiplicative price impact in algorithm trading, when an agent holds an initial position of shares of a financial asset. The inter-selling-decision times are modelled by the arrival…
In this paper, we study a pricing problem of the multiple reset put option, which allows the holder to reset several times a current strike price to obtain an at-the-money European put option. We formulate the pricing problem as a multiple…
In this article, we study the problem of pricing defaultable bond with discrete default intensity and barrier under constant risk free short rate using higher order binary options and their integrals. In our credit risk model, the risk free…
A new approximate Bayesian inferential framework is proposed that exploits multiple information sources -- daily spot returns, high-frequency spot data and option prices -- and enables fast calculation of probabilistic predictions of future…
The paper develops general, discrete, non-probabilistic market models and minmax price bounds leading to price intervals for European options. The approach provides the trajectory based analogue of martingale-like properties as well as a…