Related papers: Binomial approximations of shortfall risk for game…
In this article, we study the rate of convergence of prices when a model is approximated by some simplified model. We also provide a method how explicit error formula for more general options can be obtained if such formula is available for…
In this paper, we study a game with positive or plus infinite expectation and determine the optimal proportion of investment for maximizing the limit expectation of growth rate per attempt. With this objective, we introduce a new pricing…
We obtain error estimates for strong approximations of a diffusion with a diffusion matrix $\sigma$ and a drift b by the discrete time process defined recursively X_N((n+1)/N) = X_N(n/N)+N^{1/2}\sigma(X_N(n/N))\xi(n+1)+N^{-1}b(XN(n/N));…
We study the problem of super-replication for game options under proportional transaction costs. We consider a multidimensional continuous time model, in which the discounted stock price process satisfies the conditional full support…
In this paper we introduce a numerical method for optimal stopping in the framework of one dimensional diffusion. We use the Skorokhod embedding in order to construct recombining tree approximations for diffusions with general coefficients.…
Refining a discrete model of Cheuk and Vorst we obtain a closed formula for the price of a European lookback option at any time between emission and maturity. We derive an asymptotic expansion of the price as the number of periods tends to…
The Black-Scholes option pricing model remains a cornerstone in financial mathematics, yet its application is often challenged by the need for accurate hedging strategies, especially in dynamic market environments. This paper presents a…
The pricing, hedging, optimal exercise and optimal cancellation of game or Israeli options are considered in a multi-currency model with proportional transaction costs. Efficient constructions for optimal hedging, cancellation and exercise…
The issue of constructing a risk minimizing hedge under an additional almost-surely type constraint on the shortfall profile is examined. Several classical risk minimizing problems are adapted to the new setting and solved. In particular,…
We introduce an efficient numerical scheme for continuous time Dynkin games under model uncertainty. We use the Skorokhod embedding in order to construct recombining tree approximations. This technique allows us to determine convergence…
In this paper we consider Dynkin's games with payoffs which are functions of an underlying process. Assuming extended weak convergence of underlying processes $\{S^{(n)}\}_{n=0}^{\infty}$ to a limit process $S$ we prove convergence Dynkin's…
Game (Israeli) options in a multi-asset market model with proportional transaction costs are studied in the case when the buyer is allowed to exercise the option and the seller has the right to cancel the option gradually at a mixed (or…
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…
In this paper we propose a closed-form approximation for the price of basket options under a multivariate Black-Scholes model, based on Taylor expansions and the calculation of mixed exponential-power moments of a Gaussian distribution. Our…
Using the Donsker-Prokhorov invariance principle we extend the Kim-Stoyanov-Rachev-Fabozzi option pricing model to allow for variably-spaced trading instances, an important consideration for short-sellers of options. Applying the…
In 2002, Benjamin Jourdain and Claude Martini discovered that for a class of payoff functions, the pricing problem for American options can be reduced to pricing of European options for an appropriately associated payoff, all within a…
In this paper, we investigate the relation between Bachelier and Black-Scholes models driven by the infinitely divisible inverse subordinators. Such models, in contrast to their classical equivalents, can be used in markets where periods of…
The issue of developing simple Black-Scholes type approximations for pricing European options with large discrete dividends was popular since early 2000's with a few different approaches reported during the last 10 years. Moreover, it has…
We consider the problem of pricing perpetual American options written on dividend-paying assets whose price dynamics follow a multidimensional Black and Scholes model. For convex Lipschitz continuous reward functions, we give a…
We consider the pricing problem related to payoffs that can have discontinuities of polynomial growth. The asset price dynamic is modeled within the Black and Scholes framework characterized by a stochastic volatility term driven by a…