Related papers: Analysis of Fourier transform valuation formulas a…
We consider a class of assets whose risk-neutral pricing dynamics are described by an exponential L\'evy-type process subject to default. The class of processes we consider features locally-dependent drift, diffusion and default-intensity…
It would be interesting to investigate the accuracy of the results obtained in the variational method, because it is important for studying hadron spectra. One can define some criteria to judge the accuracy, or the quality of the trial…
In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the…
We propose a convolution-FFT method for pricing European options under the Heston model that leverages a continuously differentiable representation of the joint characteristic function. Unlike existing Fourier-based methods that rely on…
Volatility modelling has become a significant area of research within Financial Mathematics. Wiener process driven stochastic volatility models have become popular due their consistency with theoretical arguments and empirical observations.…
Using the Fourier transform, we obtain upper bounds for sums of eigenvalues of the free plate.
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…
In the setting of polynomial jump-diffusion dynamics, we provide an explicit formula for computing correlators, namely, cross-moments of the process at different time points along its path. The formula appears as a linear combination of…
We propose a method for extending a given asset pricing formula to account for two additional sources of risk: the risk associated with future changes in market--calibrated parameters and the remaining risk associated with idiosyncratic…
In this paper a real option approach for the valuation of real assets is presented. Two continuous time models used for valuation are described: geometric Brownian motion model and interest rate model. The valuation for electricity spread…
A decision maker repeatedly chooses one of a finite set of actions. In each period, the decision maker's payoff depends on fixed basic payoff of the chosen action and the frequency with which the action has been chosen in the past. We…
We fit the volatility fluctuations of the S&P 500 index well by a Chi distribution, and the distribution of log-returns by a corresponding superposition of Gaussian distributions. The Fourier transform of this is, remarkably, of the Tsallis…
Dealing with quadratic payments, marginal probability is usually considered ideally constant, maybe for the sake of initial simplicity. Considering the voting scenario depicted in "Quadratic Payments: A Primer" by Vitalik Buterin, firstly…
We propose an offline-online procedure for Fourier transform based option pricing. The method supports the acceleration of such essential tasks of mathematical finance as model calibration, real-time pricing, and, more generally, risk…
The paper builds a Variance-Gamma (VG) model with five parameters: location ($\mu$), symmetry ($\delta$), volatility ($\sigma$), shape ($\alpha$), and scale ($\theta$); and studies its application to the pricing of European options. The…
The increasing need for rapid recalibration of option pricing models in dynamic markets places stringent computational demands on data generation and valuation algorithms. In this work, we propose a hybrid algorithmic framework that…
For a given level of accuracy in option prices, the paper considers the problem of deciding when exactly, as one or more of the pricing parameters change, a barrier option degenerates into a simpler type of option. This problem is…
We derive a recursive formula for arithmetic Asian option prices with finite observation times in semimartingale models. The method is based on the relationship between the risk-neutral expectation of the quadratic variation of the return…
Based on the existing literature, this article presents the different ways of choosing the parameters of stochastic volatility models in general, in the context of pricing financial derivative contracts. This includes the use of stochastic…
Conditional Asian options are recent market innovations, which offer cheaper and long-dated alternatives to regular Asian options. In contrast with payoffs from regular Asian options which are based on average asset prices, the payoffs from…