Related papers: A Fast Mean-Reverting Correction to Heston's Stoch…

This report investigates the computation of option Greeks for European and Asian options under the Heston stochastic volatility model on GPU. We first implemented the exact simulation method proposed by Broadie and Kaya and used it as a…

Using microscopic price models based on Hawkes processes, it has been shown that under some no-arbitrage condition, the high degree of endogeneity of markets together with the phenomenon of metaorders splitting generate rough Heston-type…

We derive asymptotic expansions for the prices of a variety of European and barrier-style claims in a general local-stochastic volatility setting. Our method combines Taylor series expansions of the diffusion coefficients with an expansion…

We suggest an intermediate currency approach that allows us to price options on all FX markets simultaneously under the same risk-neutral measure which ensures consistency of FX option prices across all markets. In particular, it is…

Semi-analytical pricing of American options in a time-dependent Ornstein-Uhlenbeck model was presented in [Carr, Itkin, 2020]. It was shown that to obtain these prices one needs to solve (numerically) a nonlinear Volterra integral equation…

Deep learning is a powerful tool whose applications in quantitative finance are growing every day. Yet, artificial neural networks behave as black boxes and this hinders validation and accountability processes. Being able to interpret the…

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…

We derive a new high-order compact finite difference scheme for option pricing in stochastic volatility jump models, e.g. in Bates model. In such models the option price is determined as the solution of a partial integro-differential…

It is well documented from various empirical studies that the volatility process of an asset price dynamics is stochastic. This phenomenon called for a new approach to describing the random evolution of volatility through time with…

We consider a fractional version of the Heston volatility model which is inspired by [16]. Within this model we treat portfolio optimization problems for power utility functions. Using a suitable representation of the fractional part,…

In this paper an improved Cuckoo Search Algorithm is developed to allow for an efficient and robust calibration of the Heston option pricing model for American options. Calibration of stochastic volatility models like the Heston is…

In this article we consider affine generalizations of the Merton jump diffusion model [Merton, J. Fin. Econ., 1976] and the respective pricing of European options. On the one hand, the Brownian motion part in the Merton model may be…

We investigate the Heston model with stochastic volatility and exponential tails as a model for the typical price fluctuations of the Brazilian S\~ao Paulo Stock Exchange Index (IBOVESPA). Raw prices are first corrected for inflation and a…

We derive the short-maturity asymptotics for European and VIX option prices in local-stochastic volatility models where the volatility follows a continuous-path Markov process. Both out-of-the-money (OTM) and at-the-money (ATM) asymptotics…

This paper focuses on the pricing of continuous geometric Asian options (GAOs) under a multifactor stochastic volatility model. The model considers fast and slow mean reverting factors of volatility, where slow volatility factor is…

We propose a novel structural estimation framework in which we train a surrogate of an economic model with deep neural networks. Our methodology alleviates the curse of dimensionality and speeds up the evaluation and parameter estimation by…

Fractional stochastic volatility models have been widely used to capture the non-Markovian structure revealed from financial time series of realized volatility. On the other hand, empirical studies have identified scales in stock price…

Based on empirical market data, a stochastic volatility model is proposed with volatility driven by fractional noise. The model is used to obtain a risk-neutrality option pricing formula and an option pricing equation.

This paper deals with pricing of European and American options, when the underlying asset price follows Heston model, via the interior penalty discontinuous Galerkin finite element method (dGFEM). The advantages of dGFEM space…

In this paper we derive an easily computed approximation to European basket call prices for a local volatility jump-diffusion model. We apply the asymptotic expansion method to find the approximate value of the lower bound of European…