Related papers: Efficient swaptions price in Hull-White one factor…
The accurate valuation of financial derivatives plays a pivotal role in the finance industry. Although closed formulas for pricing are available for certain models and option types, exemplified by the European Call and Put options in the…
We present a simple, fast, and accurate method for pricing a variety of discretely monitored options in the Black-Scholes framework, including autocallable structured products, single and double barrier options, and Bermudan options. The…
Pricing financial derivatives, in particular European-style options at different time-maturities and strikes, means a relevant problem in finance. The dynamics describing the price of vanilla options when constant volatilities and interest…
The modal factor model represents a new factor model for dimension reduction in high dimensional panel data. Unlike the approximate factor model that targets for the mean factors, it captures factors that influence the conditional mode of…
Density-functional theory simplifies many-electron calculations by approximating the exchange and correlation interactions with a one-electron operator that is a functional of the density. Hybrid functionals incorporate some amount of exact…
The research presented in this article provides an alternative option pricing approach for a class of rough fractional stochastic volatility models. These models are increasingly popular between academics and practitioners due to their…
In this article we present a new approach to the numerical valuation of derivative securities. The method is based on our previous work where we formulated the theory of pricing in terms of tradables. The basic idea is to fit a finite…
Second-order optimization methods have desirable convergence properties. However, the exact Newton method requires expensive computation for the Hessian and its inverse. In this paper, we propose SPAN, a novel approximate and fast Newton…
In the first part of this thesis, we focus on American options in the Heston model. We first give an analytical characterization of the value function of an American option as the unique solution of the associated (degenerate) parabolic…
We study the problem of optimal pricing and hedging of a European option written on an illiquid asset $Z$ using a set of proxies: a liquid asset $S$, and $N$ liquid European options $P_i$, each written on a liquid asset $Y_i, i=1,N$. We…
In this article we develop an explicit formula for pricing European options when the underlying stock price follows a non-linear stochastic differential delay equation (sdde). We believe that the proposed model is sufficiently flexible to…
In this paper we discuss $\l$-policy iteration, a method for exact and approximate dynamic programming. It is intermediate between the classical value iteration (VI) and policy iteration (PI) methods, and it is closely related to optimistic…
The present article provides an efficient and accurate hybrid method to price American standard options in certain jump-diffusion models as well as American barrier-type options under the Black & Scholes framework. Our method generalizes…
A simple method is proposed to estimate the instantaneous correlations between state variables in a hybrid system from the empirical correlations between observable market quantities such as spot rate, stock price and implied volatility.…
Paper is based on "The cost of illiquidity and its effects on hedging", L. C. G. Rogers and Surbjeet Singh, 2010. We generalize its thesis to constant elasticity model, which own previously used Black-Schoels model as a special case. The…
We derive high-order compact finite difference schemes for option pricing in stochastic volatility models on non-uniform grids. The schemes are fourth-order accurate in space and second-order accurate in time for vanishing correlation. In…
We provide an European option pricing formula written in the form of an infinite series of Black Scholes type terms under double Levy jumps model, where both the interest rate and underlying price are driven by Levy process. The series…
The Wiener-Hopf factorization is obtained in closed form for a phase type approximation to the CGMY L\'{e}vy process. This allows, for the approximation, exact computation of first passage times to barrier levels via Laplace transform…
We consider approximate pricing formulas for European options based on approximating the logarithmic return's density of the underlying by a linear combination of rescaled Hermite polynomials. The resulting models, that can be seen as…
We consider a discrete-time approximation of paths of an Ornstein--Uhlenbeck process as a mean for estimation of a price of European call option in the model of financial market with stochastic volatility. The Euler--Maruyama approximation…