Related papers: Implied Correlation for Pricing multi-FX options
In this article we propose a novel approach to reduce the computational complexity of various approximation methods for pricing discrete time American options. Given a sequence of continuation values estimates corresponding to different…
The general and special repo rates are related with the prices of the European call- and American put-options. The evaluation takes into account specific business models of the parties in the repo agreement and the law restrictions. Using…
The aim of this paper is to investigate the use of close formula approximation for pricing European mortgage options. Under the assumption of logistic duration and normal mortgage rates the underlying price at the option expiry is…
In informationally efficient financial markets, option prices and this implied volatility should immediately be adjusted to new information that arrives along with a jump in underlying's return, whereas gradual changes in implied volatility…
Accurate option pricing is essential for effective trading and risk management in financial markets, yet it remains challenging due to market volatility and the limitations of traditional models like Black-Scholes. In this paper, we…
Advertising options have been recently studied as a special type of guaranteed contracts in online advertising, which are an alternative sales mechanism to real-time auctions. An advertising option is a contract which gives its buyer a…
We introduce a two-agent problem which is inspired by price asymmetry arising from funding difference. When two parties have different funding rates, the two parties deduce different fair prices for derivative contracts even under the same…
A common assumption in financial engineering is that the market price for any derivative coincides with an objectively defined risk-neutral price - a plausible assumption only if traders collectively possess objective knowledge about the…
Price without transaction makes no sense. Trading volume authenticates its corresponding price, so there exist mutual information and correlation between price and trading volume. We are curious about fractal features of this correlation…
The traditional way of building a yield curve is to choose an interpolation on discount factors, implied by the market tradable instruments. Since then, constructions based on specific interpolations of the forward rates have become the…
We consider closed-form approximations for European put option prices within the Heston and GARCH diffusion stochastic volatility models with time-dependent parameters. Our methodology involves writing the put option price as an expectation…
In this paper, the valuation of European and path-dependent options in foreign exchange (FX) markets is considered when the currency exchange rate evolves according to the Heston model combined with the Cox-Ingersoll-Ross dynamics for the…
Given a finite set of European call option prices on a single underlying, we want to know when there is a market model which is consistent with these prices. In contrast to previous studies, we allow models where the underlying trades at a…
We revisit two classical problems: the determination of the law of the underlying with respect to a risk-neutral measure on the basis of option prices, and the pricing of options with convex payoffs in terms of prices of call options with…
In this paper new analytical and numerical approaches to valuating path-dependent options of European type have been developed. The model of stochastic volatility as a basic model has been chosen. For European options we could improve the…
The vast majority of works on option pricing operate on the assumption of risk neutral valuation, and consequently focus on the expected value of option returns, and do not consider risk parameters, such as variance. We show that it is…
The influence of the past price behaviour on the realized volatility is investigated in the present article. The results show that trending (drifting) prices lead to increased (decreased) realized volatility. This ``volatility induced by…
In the recent years, banks have sold structured products such as worst-of options, Everest and Himalayas, resulting in a short correlation exposure. They have hence become interested in offsetting part of this exposure, namely buying back…
Siegel's paradox is a fundamental question in international finance about exchange rates for futures contracts and has puzzled many scholars for over forty years. The unorthodox approach presented in this article leads to an arbitrage-free…
Recent empirical studies suggest that the volatilities associated with financial time series exhibit short-range correlations. This entails that the volatility process is very rough and its autocorrelation exhibits sharp decay at the…