Related papers: Semi-Static Hedging Based on a Generalized Reflect…
This work addresses the problem of pricing American basket options in a multivariate setting, which includes among others, the Bachelier and the Black-Scholes models. In high dimensions, nonlinear partial differential equation methods for…
A unified analytical pricing framework with involvement of the shot noise random process has been introduced and elaborated. Two exactly solvable new models have been developed. The first model has been designed to value options. It is…
Option contracts can be valued by using the Black-Scholes equation, a partial differential equation with initial conditions. An exact solution for European style options is known. The computation time and the error need to be minimized…
Motivated by the work of Segal and Segal on the Black-Scholes pricing formula in the quantum context, we study a quantum extension of the Black-Scholes equation within the context of Hudson-Parthasarathy quantum stochastic calculus. Our…
We consider the mean-variance hedging problem under partial Information. The underlying asset price process follows a continuous semimartingale and strategies have to be constructed when only part of the information in the market is…
A new mathematical model for the Black-Scholes equation is proposed to forecast option prices. This model includes new interval for the price of the underlying stock as well as new initial and boundary conditions. Conventional notions of…
We show how to price and replicate a variety of barrier-style claims written on the $\log$ price $X$ and quadratic variation $\langle X \rangle$ of a risky asset. Our framework assumes no arbitrage, frictionless markets and zero interest…
Densities of states weighted with the diagonal matrix elements of two operators A and B, i.e., rho^(A,B)(E) = sum_n <n|A|n><n|B|n> delta(E-E_n) cannot, in general, be written as a trace formula, and therefore no simple extension of…
This paper proposes a semiparametric stochastic volatility (SV) model that relaxes the restrictive Gaussian assumption in both the return and volatility error terms, allowing them to follow flexible, nonparametric distributions with…
Quasi-equilibrium models for aggregate variables are widely-used throughout finance and economics. The validity of such models depends crucially upon assuming that the systems' participants behave both independently and in a Markovian…
The state price density of a basket, even under uncorrelated Black-Scholes dynamics, does not allow for a closed from density. (This may be rephrased as statement on the sum of lognormals and is especially annoying for such are used most…
We study an optimal execution problem in a continuous-time market model that considers market impact. We formulate the problem as a stochastic control problem and investigate properties of the corresponding value function. We find that…
We construct a Hunt process that can be described as an isotropic $\alpha$-stable L\'evy process reflected from the complement of a bounded open Lipschitz set. In fact, we introduce a new analytic method for concatenating Markov processes.…
We propose a novel Black-Scholes model under which the stock price processes are modeled by stochastic differential equations driven by sub-diffusions. The new framework can capture the less financial activity phenomenon during the bear…
We consider the robust pricing and hedging of American options in a continuous time setting. We assume asset prices are continuous semimartingales, but we allow for general model uncertainty specification via adapted closed convex…
Consider a generic triangle in the upper half of the complex plane with one side on the real line. This paper presents a tailored construction of a discrete random walk whose continuum limit is a Brownian motion in the triangle, reflected…
We prove some semipositivity theorems for singular varieties coming from graded polarizable admissible variations of mixed Hodge structure. As an application, we obtain that the moduli functor of stable varieties is semipositive in the…
This paper examines a semi-analytical approach for pricing American options in time-inhomogeneous models characterized by negative interest rates (for equity/FX) or negative convenience yields (for commodities/cryptocurrencies). Under such…
We prove a robust super-hedging duality result for path-dependent options on assets with jumps, in a continuous time setting. It requires that the collection of martingale measures is rich enough and that the payoff function satisfies some…
We study a model for the entanglement of a two-dimensional reflecting Brownian motion in a bounded region divided into two halves by a wall with three or more small windows. We map the Brownian motion into a Markov Chain on the fundamental…