Related papers: Continuously monitored barrier options under Marko…
We propose a very efficient method for pricing various types of lookback options under Markov models. We utilize the model-free representations of lookback option prices as integrals of first passage probabilities. We combine efficient…
In this paper we present a very simple way to price a class of barrier options when the underlying process is driven by a huge class of L\'evy processes. To achieve our goal we assume that our market satisfies a symmetry property. In case…
Markov automata combine non-determinism, probabilistic branching, and exponentially distributed delays. This compositional variant of continuous-time Markov decision processes is used in reliability engineering, performance evaluation and…
This paper deals with a high-order accurate implicit finite-difference approach to the pricing of barrier options. In this way various types of barrier options are priced, including barrier options paying rebates, and options on…
We present the method of moments approach to pricing barrier-type options when the underlying is modelled by a general class of jump diffusions. By general principles the option prices are linked to certain infinite dimensional linear…
This paper presents a multinomial method for option pricing when the underlying asset follows an exponential Variance Gamma process. The continuous time Variance Gamma process is approximated by a discrete time Markov chain with the same…
This paper is a supplement to our recent paper ``Alternative models for FX, arbitrage opportunities and efficient pricing of double barrier options in L\'evy models". We introduce the class of regime-switching L\'evy models with memory,…
In this paper, we give a numerical method for pricing long maturity, path dependent options by using the Markov property for each underlying asset. This enables us to approximate a path dependent option by using some kinds of plain…
We consider Markov decision processes where the state of the chain is only given at chosen observation times and of a cost. Optimal strategies involve the optimisation of observation times as well as the subsequent action values. We…
Barrier options are one of the most widely traded exotic options on stock exchanges. In this paper, we develop a new stochastic simulation method for pricing barrier options and estimating the corresponding execution probabilities. We show…
We investigate the pricing of financial options under the 2-hypergeometric stochastic volatility model. This is an analytically tractable model that reproduces the volatility smile and skew effects observed in empirical market data. Using a…
We demonstrate effectiveness of the first-order algorithm from [Milstein, Tretyakov. Theory Prob. Appl. 47 (2002), 53-68] in application to barrier option pricing. The algorithm uses the weak Euler approximation far from barriers and a…
We propose a method based on continuous time Markov chain approximation to compute the distribution of Parisian stopping times and price Parisian options under general one-dimensional Markov processes. We prove the convergence of the method…
We provided an analytical representation of the price of a barrier option with one type of special moving barrier. We consider the case that risk free rate, dividend rate and stock volatility are time dependent. We get a pricing formula and…
In this paper, we have studied option pricing methods that are based on a Bayesian Markov-Switching Vector Autoregressive (MS-BVAR) process using a risk-neutral valuation approach. A BVAR process, which is a special case of the Bayesian…
The latter author, together with collaborators, proposed a numerical scheme to calculate the price of barrier options. The scheme is based on a symmetrization of diffusion process. The present paper aims to give a mathematical credit to the…
Sequential Monte Carlo (SMC) methods have successfully been used in many applications in engineering, statistics and physics. However, these are seldom used in financial option pricing literature and practice. This paper presents SMC method…
This paper is concerned with the solution of the optimal stopping problem associated to the valuation of Perpetual American options driven by continuous time Markov chains. We introduce a new dynamic approach for the numerical pricing of…
We consider option pricing using a discrete-time Markov switching stochastic volatility with co-jump model, which can model volatility clustering and varying mean-reversion speeds of volatility. For pricing European options, we develop a…
This paper is devoted to the pricing of Barrier options by optimal quadratic quantization method. From a known useful representation of the premium of barrier options one deduces an algorithm similar to one used to estimate nonlinear filter…