Related papers: New Financial Research Program: General Option-Pri…
This paper presents a novel way to apply mathematical finance and machine learning (ML) to forecast stock options prices. Following results from the paper Quasi-Reversibility Method and Neural Network Machine Learning to Solution of…
The Ivancevic option pricing model is studied via variational approach. Both the Gaussian anstz and the (sech ansatz are used, and each has a unique results from one another. But in terms of existance of soliton solutions they both agree…
In this work, we introduce a novel pricing methodology in general, possibly non-Markovian local stochastic volatility (LSV) models. We observe that by conditioning the LSV dynamics on the Brownian motion that drives the volatility, one…
The main purpose of this article is to give a general overview and understanding of the first widely used option-pricing model, the Black-Scholes model. The history and context are presented, with the usefulness and implications in the…
The Nonlinear Schr\"odinger (NLS) equation is widely used in everywhere of natural science. Various nonlinear excitations of the NLS equation have been found by many methods. However, except for the soliton-soliton interactions, it is very…
We establish an explicit pricing formula for the class of L\'evy-stable models with maximal negative asymmetry (Log-L\'evy model with finite moments and stability parameter $1<\alpha\leq 2$) in the form of rapidly converging series. The…
The studied model was suggested to design a perfect hedging strategy for a large trader. In this case the implementation of a hedging strategy affects the price of the underlying security. The feedback-effect leads to a nonlinear version of…
We apply a physics-informed deep-learning approach the PINN approach to the Black-Scholes equation for pricing American and European options. We test our approach on both simulated as well as real market data, compare it to…
We consider reduced-order modeling of nonlinear dispersive waves described by a class of nonlinear Schrodinger (NLS) equations. We compare two nonlinear reduced-order modeling methods: (i) The reduced Lagrangian approach which relies on the…
Options financial instruments designed to protect investors from the stock market randomness. In 1973, Fisher Black, Myron Scholes and Robert Merton proposed a very popular option pricing method using stochastic differential equations…
This paper presents a novel way to predict options price for one day in advance, utilizing the method of Quasi-Reversibility for solving the Black-Scholes equation. The Black-Scholes equation solved forwards in time with Tikhonov…
In recent studies the truncated Levy process (TLP) has been shown to be very promising for the modeling of financial dynamics. In contrast to the Levy process, the TLP has finite moments and can account for both the previously observed…
The paper develops a new class of financial market models. These models are based on generalized telegraph processes: Markov random flows with alternating velocities and jumps occurring when the velocities are switching. While such markets…
In the previous paper (Inverse Problems, 32, 015010, 2016), a new heuristic mathematical model was proposed for accurate forecasting of prices of stock options for 1-2 trading days ahead of the present one. This new technique uses the…
Using the inverse spectral theory of the nonlinear Schrodinger (NLS) equation we correlate the development of rogue waves in oceanic sea states characterized by the JONSWAP spectrum with the proximity to homoclinic solutions of the NLS…
An intriguing link between a wide range of problems occurring in physics and financial engineering is presented. These problems include the evolution of small perturbations of linear flows in hydrodynamics, the movements of particles in…
Black-Scholes implied volatility is a quantile. The insight follows from the normalized option price being a probability on the variance scale, with the inverse Gaussian distribution providing the link. It enables analytically exact and…
We analyze the empirical performance of several non-parametric estimators of the pricing functional for European options, using historical put and call prices on the S&P500 during the year 2012. Two main families of estimators are…
Option pricing formulas are derived from a non-Gaussian model of stock returns. Fluctuations are assumed to evolve according to a nonlinear Fokker-Planck equation which maximizes the Tsallis nonextensive entropy of index $q$. A generalized…
We consider linear instability of solitary waves of several classes of dispersive long wave models. They include generalizations of KDV, BBM, regularized Boussinesq equations, with general dispersive operators and nonlinear terms. We obtain…