Related papers: A Fourier transform method for spread option prici…
For the Barndorff-Nielsen and Shephard model, we present approximate expressions of call option prices based on the decomposition formula developed by Arai (2021). Besides, some numerical experiments are also implemented to make sure how…
Fast pricing of American-style options has been a difficult problem since it was first introduced to financial markets in 1970s, especially when the underlying stocks' prices follow some jump-diffusion processes. In this paper, we propose a…
We propose an innovative data-driven option pricing methodology that relies exclusively on the dataset of historical underlying asset prices. While the dataset is rooted in the objective world, option prices are commonly expressed as…
We explore a decomposition in which returns on a large class of portfolios relative to the market depend on a smooth non-negative drift and changes in the asset price distribution. This decomposition is obtained using general continuous…
Option pricing is an integral part of modern financial risk management. The well-known Black and Scholes (1973) formula is commonly used for this purpose. This paper is an attempt to extend their work to a situation in which the…
In the paper, the pricing of Quanto options is studied, where the underlying foreign asset and the exchange rate are correlated with each other. Firstly, we adopt Bayesian methods to estimate unknown parameters entering the pricing formula…
We derive a forward partial integro-differential equation for prices of call options in a model where the dynamics of the underlying asset under the pricing measure is described by a -possibly discontinuous- semimartingale. A uniqueness…
Financial derivatives pricing aims to find the fair value of a financial contract on an underlying asset. Here we consider option pricing in the partial differential equations framework. The contemporary models lead to one-dimensional or…
The goal of this paper is to investigate the method outlined by one of us (PR) in Cherubini et al. (2009) to compute option prices. We name it the SINC approach. While the COS method by Fang and Osterlee (2009) leverages the Fourier-cosine…
In this paper, we investigate a numerical algorithm for the pricing of swing options, relying on the so-called optimal quantization method. The numerical procedure is described in details and numerous simulations are provided to assert its…
This paper introduces a generalised 3rd-order Spectral Representation Method for the simulation of multi-dimensional stochastic fields with asymmetric non-linearities. The simulated random fields satisfy a prescribed Power Spectrum and…
This work illustrates how several new pricing formulas for exotic options can be derived within a Levy framework by employing a unique pricing expression. Many existing pricing formulas of the traditional Gaussian model are obtained as a…
In this paper we analyze a nonlinear Black--Scholes model for option pricing under variable transaction costs. The diffusion coefficient of the nonlinear parabolic equation for the price $V$ is assumed to be a function of the underlying…
Given a time series vector, how can we efficiently compute a specified part of Fourier coefficients? Fast Fourier transform (FFT) is a widely used algorithm that computes the discrete Fourier transform in many machine learning applications.…
In this paper we study the pricing of exchange options when underlying assets have stochastic volatility and stochastic correlation. An approximation using a closed-form approximation based on a Taylor expansion of the conditional price is…
We derive a forward equation for arbitrage-free barrier option prices, in terms of Markovian projections of the stochastic volatility process, in continuous semi-martingale models. This provides a Dupire-type formula for the coefficient…
In this article, a compact finite difference method is proposed for pricing European and American options under jump-diffusion models. Partial integro-differential equation and linear complementary problem governing European and American…
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…
The aim of this chapter is to show how option prices in jump-diffusion models can be computed using meshless methods based on Radial Basis Function (RBF) interpolation. The RBF technique is demonstrated by solving the partial…
In this paper, we derive closed-form formulas of first-order approximation for down-and-out barrier and floating strike lookback put option prices under a stochastic volatility model, by using an asymptotic approach. To find the explicit…