Related papers: Efficient swaptions price in Hull-White one factor…
The efficient market hypothesis (EMH) famously stated that prices fully reflect the information available to traders. This critically depends on the transfer of information into prices through trading strategies. Traders optimise their…
In this paper a simple model for the evolution of the forward density of the future value of an asset is proposed. The model allows for a straightforward initial calibration to option prices and has dynamics that are consistent with…
In this paper, we focus on option pricing models based on space-time fractional diffusion. We briefly revise recent results which show that the option price can be represented in the terms of rapidly converging double-series and apply these…
In this paper we present a new method to compute the first-order approximation of the price of derivatives on futures in the context of multiscale stochastic volatility of Fouque \textit{et al.} (2011, CUP). It provides an alternative…
This study investigates empirically whether the degree of stock market efficiency is related to the prediction power of future price change using the indices of twenty seven stock markets. Efficiency refers to weak-form efficient market…
This paper investigates the pricing and hedging of variance swaps under a $3/2$ volatility model. Explicit pricing and hedging formulas of variance swaps are obtained under the benchmark approach, which only requires the existence of the…
We examine in this article the pricing of target volatility options in the lognormal fractional SABR model. A decomposition formula by Ito's calculus yields a theoretical replicating strategy for the target volatility option, assuming the…
This paper extends the valuation and optimal surrender framework for variable annuities with guaranteed minimum benefits in a L\'evy equity market environment by incorporating a stochastic interest rate described by the Hull-White model.…
In this work we are concerned with valuing optionalities associated to invest or to delay investment in a project when the available information provided to the manager comes from simulated data of cash flows under historical (or…
We propose a hybrid tree-finite difference method in order to approximate the Heston model. We prove the convergence by embedding the procedure in a bivariate Markov chain and we study the convergence of European and American option prices.…
We present a new high-order compact scheme for the multi-dimensional Black-Scholes model with application to European Put options on a basket of two underlying assets. The scheme is second-order accurate in time and fourth-order accurate in…
It was recently demonstrated that a simple Monte Carlo (MC) algorithm involving the swap of particle pairs dramatically accelerates the equilibrium sampling of simulated supercooled liquids. We propose two numerical schemes integrating the…
This paper concerns the design of a Fourier based pseudospectral numerical method for the model of European Option Pricing with transaction costs under Exponential Utility derived by Davis, Panas and Zariphopoulou. Computing the option…
An advantageous feature of piecewise constant policy timestepping for Hamilton-Jacobi-Bellman (HJB) equations is that different linear approximation schemes, and indeed different meshes, can be used for the resulting linear equations for…
In a previous paper it was shown that the Forward Euler method applied to differential inclusions where the right-hand side is a Lipschitz continuous set-valued function with uniformly bounded, compact values, converges with rate one. The…
The problem of approximating a sampled function using sums of a fixed number of complex exponentials is considered. We use alternating projections between fixed rank matrices and Hankel matrices to obtain such an approximation. Convergence,…
The purpose of the paper is to present a new pricing method for clean spread options, and to illustrate its main features on a set of numerical examples produced by a dedicated computer code. The novelty of the approach is embedded in the…
We solve the superhedging problem for European options in an illiquid extension of the Black-Scholes model, in which transactions have transient price impact and the costs and the strategies for hedging are affected by physical or cash…
This paper deals with the problem of discrete-time option pricing by the mixed fractional version of Merton model with transaction costs. By a mean-self-financing delta hedging argument in a discrete-time setting, a European call option…
This paper presents closed-form analytical formulas for pricing volatility and variance derivatives with nonlinear payoffs under discrete-time observations. The analysis is based on a probabilistic approach assuming that the underlying…