Related papers: A Finite Element Framework for Option Pricing with…
In this paper the valuation problem of a European call option in presence of both stochastic volatility and transaction costs is considered. In the limit of small transaction costs and fast mean reversion, an asymptotic expression for the…
In this paper, we study the option pricing problems for rough volatility models. As the framework is non-Markovian, the value function for a European option is not deterministic; rather, it is random and satisfies a backward stochastic…
Recognizing the importance of jump risk in option pricing, we propose a neural jump stochastic differential equation model in this paper, which integrates neural networks as parameter estimators in the conventional jump diffusion model. To…
We investigate the relation between the fair price for European-style vanilla options and the distribution of short-term returns on the underlying asset ignoring transaction and other costs. We compute the risk-neutral probability density…
This paper investigates analytic properties of American option prices under the finite moment log-stable (FMLS) model. Under this model the price of American options is characterised by the free boundary problem of a fractional partial…
In this article, we provide representations of European and American exchange option prices under stochastic volatility jump-diffusion (SVJD) dynamics following models by Merton (1976), Heston (1993), and Bates (1996). A Radon-Nikodym…
We investigate qualitative and quantitative behavior of a solution of the mathematical model for pricing American style of perpetual put options. We assume the option price is a solution to the stationary generalized Black-Scholes equation…
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 establish an explicit pricing formula for the class of L\'evy-stable models with maximal negative asymmetry (Log-L\'evy model with finite moments and stability parameter $1<\alpha\leq 2$) in the form of rapidly converging series. The…
Using spectral decomposition techniques and singular perturbation theory, we develop a systematic method to approximate the prices of a variety of options in a fast mean-reverting stochastic volatility setting. Four examples are provided in…
We develop a quantum algorithm to price discretely monitored lookback options in the Black-Scholes framework using imaginary time evolution. By rewriting the pricing PDE as a Schrodinger-type equation, the problem becomes the imaginary time…
Option pricing models, essential in financial mathematics and risk management, have been extensively studied and recently advanced by AI methodologies. However, American option pricing remains challenging due to the complexity of…
This paper concerns the numerical valuation of swing options with discrete action times under a linear two-factor mean-reverting model with jumps. The resulting sequence of two-dimensional partial integro-differential equations (PIDEs) are…
This paper proposes to model asset price dynamics with a mixture of diffusion processes where the instantaneous volatility of the underlying diffusion process contains a random vector. The marginal probability distributions of the proposed…
In this paper we analyse financial implications of exchangeability and similar properties of finite dimensional random vectors. We show how these properties are reflected in prices of some basket options in view of the well-known put-call…
One of the shortcomings of the Black and Scholes model on option pricing is the assumption that trading of the underlying asset does not affect the price of that asset. This assumption can be fulfilled only in perfectly liquid markets.…
This dissertation develops and justifies a novel method for deriving approximate formulas to estimate two parameters in stochastic volatility diffusion models with exponentially-affine characteristic functions and single- or two-factor…
Building on a prominent agent-based model, we present a new structural stochastic volatility asset pricing model of fundamentalists vs. chartists where the prices are determined based on excess demand. Specifically, this allows for…
We consider a stochastic volatility model with jumps where the underlying asset price is driven by the process sum of a 2-dimensional Brownian motion and a 2-dimensional compensated Poisson process. The market is incomplete, resulting in…
We consider a tick-by-tick model of price formation, in which buy and sell orders are modeled as self-exciting point processes (Hawkes process), similar to the one in [Bacry, Delattre, Hoffmann, Muzy, Modelling microstructure noise with…