Related papers: Perpetual Cancellable American Call Option

This paper uses recent results on continuous-time finite-horizon optimal switching problems with negative switching costs to prove the existence of a saddle point in an optimal stopping (Dynkin) game. Sufficient conditions for the game's…

We study two-player zero-sum repeated games with incomplete information on one side, where the payoff function is tail measurable (and not necessarily the long-run average payoff). We show that the maxmin value equals the concavification of…

We consider the problem of finding model-independent bounds on the price of an Asian option, when the call prices at the maturity date of the option are known. Our methods differ from most approaches to model-independent pricing in that we…

We study optimal stopping problems related to the pricing of perpetual American options in an extension of the Black-Merton-Scholes model in which the dividend and volatility rates of the underlying risky asset depend on the running values…

The pricing, hedging, optimal exercise and optimal cancellation of game or Israeli options are considered in a multi-currency model with proportional transaction costs. Efficient constructions for optimal hedging, cancellation and exercise…

An analytic method for pricing American call options is provided; followed by an empirical method for pricing Asian call options. The methodology is the pricing theory presented in "A Modern Theory of Random Variation", by Patrick…

This work studies the valuation of currency options in markets suffering from a financial crisis. We consider a European option where the underlying asset is a foreign currency. We assume that the value of the underlying asset is a…

Insurance companies often include very long-term guarantees in participating life insurance products, which can turn out to be very valuable. Under a guaranteed annuity options (G.A.O), the insurer guarantees to convert a policyholder's…

We study the regularity of the stochastic representation of the solution of a class of initial-boundary value problems related to a regime-switching diffusion. This representation is related to the value function of a finite-horizon optimal…

We consider the pricing of derivatives written on the discretely sampled realized variance of an underlying security. In the literature, the realized variance is usually approximated by its continuous-time limit, the quadratic variation of…

We present a novel method for the numerical pricing of American options based on Monte Carlo simulation and the optimization of exercise strategies. Previous solutions to this problem either explicitly or implicitly determine so-called…

We present an adaptive approach for valuing the European call option on assets with stochastic volatility. The essential feature of the method is a reduction of uncertainty in latent volatility due to a Bayesian learning procedure. Starting…

In this paper we introduce a new algorithm for American Monte Carlo that can be used either for American-style options, callable structured products or for computing counterparty credit risk (e.g. CVA or PFE computation). Leveraging least…

We apply a utility-based method to obtain the value of a finite-time investment opportunity when the underlying real asset is not perfectly correlated to a traded financial asset. Using a discrete-time algorithm to calculate the…

We derive the Black-Scholes-Merton dual equation, which has exactly the same form as the Black-Scholes-Merton equation. The novel and general equation works for options with a payoff of homogeneous of degree one, including European,…

This paper introduces a semi-analytical method for pricing American options on assets (stocks, ETFs) that pay discrete and/or continuous dividends. The problem is notoriously complex because discrete dividends create abrupt price drops and…

In this paper we derive an effective equation for derivative pricing which accounts for the presence of virtual arbitrage opportunities and their elimination by the market. We model the arbitrage return by a stochastic process and find an…

Real life hedging in the Black-Scholes model must be imperfect and if the stock's drift is higher than the risk free rate, leads to a profit on average. Hence the option price is examined as a fair game agreement between the parties, based…

There is no known way of giving a domain-theoretic semantics to higher-order probabilistic languages, in such a way that the involved domains are continuous or quasi-continuous - the latter is required to do any serious mathematics. We…

In this paper we analyze a nonlinear Black--Scholes model for option pricing under variable transaction costs. The diffusion coefficient of the nonlinear parabolic equation for the price $V$ is assumed to be a function of the underlying…