Related papers: Pricing of barrier options by marginal functional …
In this paper is investigated the pricing problem of options on bonds with credit risk based on analysis on two kinds of solving problems for the Black-Scholes equations. First, a solution representation of the Black-Scholes equation with…
We propose a new method for solving optimal stopping problems (such as American option pricing in finance) under minimal assumptions on the underlying stochastic process $X$. We consider classic and randomized stopping times represented by…
For a semi-martingale $X_t$, which forms a stochastic boundary, a rate-optimal estimator for its quadratic variation $\langle X, X \rangle_t$ is constructed based on observations in the vicinity of $X_t$. The problem is embedded in a…
We present a quantum algorithm for European option pricing in finance, where the key idea is to work in the unary representation of the asset value. The algorithm needs novel circuitry and is divided in three parts: first, the amplitude…
Adaptive wave model for financial option pricing is proposed, as a high-complexity alternative to the standard Black--Scholes model. The new option-pricing model, representing a controlled Brownian motion, includes two wave-type approaches:…
In this paper we develop numerical pricing methodologies for European style Exchange Options written on a pair of correlated assets, in a market with finite liquidity. In contrast to the standard multi-asset Black-Scholes framework, trading…
In this article we consider an optimization problem of expected utility maximization of continuous-time trading in a financial market. This trading is constrained by a benchmark for a utility-based shortfall risk measure. The market…
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…
In this paper we introduce a new approach to model-free path-dependent option pricing. We first introduce a general duality result for linear optimisation problems over signed measures introduced in [3] and show how the the problem of…
Pricing a multi-asset derivative is an important problem in financial engineering, both theoretically and practically. Although it is suitable to numerically solve partial differential equations to calculate the prices of certain types of…
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 author presents alternatives to the Black-Scholes european call option pricing model by incorporating different transaction cost structures in the replicating strategy. In particular, an exponentially decreasing structure is proposed…
Option pricing is the most elemental challenge of mathematical finance. Knowledge of the prices of options at every strike is equivalent to knowing the entire pricing distribution for a security, as derivatives contingent on the security…
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 extend variational quantum optimization algorithms for Quadratic Unconstrained Binary Optimization problems to the class of Mixed Binary Optimization problems. This allows us to combine binary decision variables with continuous decision…
It is well known that the Black-Scholes-Merton model suffers from several deficiencies. Jump-diffusion and Levy models have been widely used to partially alleviate some of the biases inherent in this classical model. Unfortunately, the…
In this paper we investigate a class of swing options with firm constraints in view of the modeling of supply agreements. We show, for a fully general payoff process, that the premium, solution to a stochastic control problem, is concave…
Dealing with quadratic payments, marginal probability is usually considered ideally constant, maybe for the sake of initial simplicity. Considering the voting scenario depicted in "Quadratic Payments: A Primer" by Vitalik Buterin, firstly…
In some quantum algorithms, arithmetic operations are of utmost importance for resource estimation. In binary quantum systems, some efficient implementation of arithmetic operations like, addition/subtraction, multiplication/division,…
We examine optimal quadratic hedging of barrier options in a discretely sampled exponential L\'{e}vy model that has been realistically calibrated to reflect the leptokurtic nature of equity returns. Our main finding is that the impact of…