Related papers: A Fourier transform method for spread option prici…
We derive a new high-order compact finite difference scheme for option pricing in stochastic volatility models. The scheme is fourth-order accurate in space and second-order accurate in time. Under some restrictions, theoretical results…
Data-driven prediction of fluid flow and temperature distribution in marine and aerospace engineering has received extensive research and demonstrated its potential in real-time prediction recently. However, usually large amounts of…
The portfolio optimization problem is a basic problem of financial analysis. In the study, an optimization model for constructing an options portfolio with a certain payoff function has been proposed. The model is formulated as an integer…
Volatility modelling has become a significant area of research within Financial Mathematics. Wiener process driven stochastic volatility models have become popular due their consistency with theoretical arguments and empirical observations.…
Using tools from spectral analysis, singular and regular perturbation theory, we develop a systematic method for analytically computing the approximate price of a derivative-asset. The payoff of the derivative-asset may be path-dependent.…
This paper covers a massive acceleration of Monte-Carlo based pricing method for financial products and financial derivatives. The method is applicable in risk management settings, where a financial product has to be priced under a number…
In this work, we consider the issue of pricing exchange options and spread options with stochastic interest rates. We provide the closed form solution for the exchange option price when interest rate is stochastic. Our result holds when…
We present a new numerical method to price vanilla options quickly in time-changed Brownian motion models. The method is based on rational function approximations of the Black-Scholes formula. Detailed numerical results are given for a…
In this paper, we consider the numerical pricing of financial derivatives using Radial Basis Function generated Finite Differences in space. Such discretization methods have the advantage of not requiring Cartesian grids. Instead, the nodes…
Financial options are contracts that specify the right to buy or sell an underlying asset at a strike price by an expiration date. Standard exchanges offer options of predetermined strike values and trade options of different strikes…
In this paper we develop an algorithm to calculate the prices and Greeks of barrier options in a hyper-exponential additive model with piecewise constant parameters. We obtain an explicit semi-analytical expression for the first-passage…
We describe a model of a communication network that allows us to price complex network services as financial derivative contracts based on the spot price of the capacity in individual routers. We prove a theorem of a Girsanov transform that…
This paper is dedicated to the construction of high-order (in both space and time) finite-difference schemes for both forward and backward PDEs and PIDEs, such that option prices obtained by solving both the forward and backward equations…
In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the…
Fourier-based methods are central to option pricing and hedging when the Fourier-Laplace transform of the log-price and integrated variance is available semi-explicitly. This is the case for the Volterra Stein-Stein stochastic volatility…
Under a generalized skew normal distribution we consider the problem of European option pricing. Existence of the martingale measure is proved. An explicit expression for a given European option price is presented in terms of the cumulative…
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…
We present a super-high-efficiency approximate computing scheme for series sum and discrete Fourier transform. The summation of a series sum or a discrete Fourier transform is approximated by summing over part of the terms multiplied by…
Continuous time models in the theory of real options give explicit formulas for optimal exercise strategies when options are simple and the price of an underlying asset follows a geometric Brownian motion. This paper suggests a general,…
A simple statement and accessible proof of a version of the Fundamental Theorem of Asset Pricing in discrete time is provided. Careful distinction is made between prices and cash flows in order to provide uniform treatment of all…