Related papers: T-Systems and the lower Snell envelope
We propose a deep neural network framework for computing prices and deltas of American options in high dimensions. The architecture of the framework is a sequence of neural networks, where each network learns the difference of the price…
The virtue of an American option is that it can be exercised at any time. This right is particularly valuable when there is model uncertainty. Yet almost all the extensive literature on American options assumes away model uncertainty. This…
The main result of this paper is a probabilistic proof of the penalty method for approximating the price of an American put in the Black-Scholes market. The method gives a parametrized family of partial differential equations, and by…
A version of indifference valuation of a European call option is proposed that includes statistical regularities of nonstochastic randomness. Classical relations (forward contract value and Black-Scholes formula) are obtained as particular…
We study a specific class of finite-horizon mean field optimal stopping problems by means of the dynamic programming approach. In particular, we consider problems where the state process is not affected by the stopping time. Such problems…
We present the Stochastic alternate Linearization Method (StochaLM), a token-based method for distributed optimization. This algorithm finds the solution of a consensus optimization problem by solving a sequence of subproblems where some…
This paper demonstrates a practical method for computing the solution of an expectation-constrained robust maximization problem with immediate applications to model-free no-arbitrage bounds and super-replication values for many financial…
The t\^atonnement process and Smale's process are two classical approaches to compute market equilibrium in exchange economies. While the t\^atonnement process can be seen as a first-order method, Smale's process, being second-order, is…
We show that classical chaining bounds on the suprema of random processes in terms of entropy numbers can be systematically improved when the underlying set is convex: the entropy numbers need not be computed for the entire set, but only…
A statistical decision problem is hidden in the core of option pricing. A simple form for the price C of a European call option is obtained via the minimum Bayes risk, R_B, of a 2-parameter estimation problem, thus justifying calling C…
I explicitly work out closed form solutions for the optimal hedging strategies (in the sense of Bouchaud and Sornette) in the case of European call options, where the underlying is modeled by (unbiased) iid additive returns with Student-t…
In the recent paper \cite{DESZ}, the notion of $\mathscr{Y}^{g,\xi}$-submartingale processes has been introduced. Within a jump-diffusion model, we prove here that a process $X$ which satisfies the simultaneous…
We study low-rank tensor-product B-spline (TPBS) models for regression tasks and investigate Dirichlet energy as a measure of smoothness. We show that TPBS models admit a closed-form expression for the Dirichlet energy, and reveal scenarios…
In large scale collective decision making, social choice is a normative study of how one ought to design a protocol for reaching consensus. However, in instances where the underlying decision space is too large or complex for ordinal…
In the following paper we provide a review and development of sequential Monte Carlo (SMC) methods for option pricing. SMC are a class of Monte Carlo-based algorithms, that are designed to approximate expectations w.r.t a sequence of…
This paper presents the Runge-Kutta-Legendre finite difference scheme, allowing for an additional shift in its polynomial representation. A short presentation of the stability region, comparatively to the Runge-Kutta-Chebyshev scheme…
We study the upper and lower bounds for prices of European and American style options with the possibility of an external termination, meaning that the contract may be terminated at some random time. Under the assumption that the underlying…
We revisit the stochastic collocation method using the exponential of a quadratic spline. In particular, we look in details whether it is more appropriate to fix the ordinates and optimize the abscissae of an interpolating spline or to fix…
The main object of investigation in this paper is a very general regression model in optional setting - when an observed process is an optional semimartingale depending on an unknown parameter. It is well-known that statistical data may…
This paper sets out to provide a general framework for the pricing of average-type options via lower and upper bounds. This class of options includes Asian, basket and options on the volume-weighted average price. We demonstrate that in…