Related papers: Pricing of average strike Asian call option using …
In this paper, we present a novel approach to solving the American put options pricing model by hugely relying on a front-fixing Crank-Nicolson finite difference method. Since the American put option pricing model is a widely used financial…
In the following paper we provide a review and development of sequential Monte Carlo (SMC) methods for option pricing. SMC are a class of Monte Carlo-based algorithms, that are designed to approximate expectations w.r.t a sequence of…
In this paper we investigate a nonlinear generalization of the Black-Scholes equation for pricing American style call options in which the volatility term may depend on the underlying asset price and the Gamma of the option. We propose a…
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…
In this paper the Buchen's pricing formulae of (higher order) asset and bond binary options are incorporated into the pricing formula of power binary options and a pricing formula of "the normal distribution standard options" with the…
We consider the problem of pricing path-dependent options on a basket of underlying assets using simulations. As an example we develop our studies using Asian options. Asian options are derivative contracts in which the underlying variable…
We derive a recursive formula for arithmetic Asian option prices with finite observation times in semimartingale models. The method is based on the relationship between the risk-neutral expectation of the quadratic variation of the return…
We present high-order compact schemes for a linear second-order parabolic partial differential equation (PDE) with mixed second-order derivative terms in two spatial dimensions. The schemes are applied to option pricing PDE for a family of…
The method and characteristics of several approaches to the pricing of discretely monitored arithmetic Asian options on stocks with discrete, absolute dividends are described. The contrast between method behaviors for options with an Asian…
In this paper, we price American-style Parisian down-and-in call options under the Black-Scholes framework. Usually, pricing an American-style option is much more difficult than pricing its European-style counterpart because of the…
Employing probabilistic techniques we compute best possible upper and lower bounds on the price of an option on one or two assets with continuous piecewise linear payoff function based on prices of simple call options of possibly distinct…
This paper presents a new model for options pricing. The Black-Scholes-Merton (BSM) model plays an important role in financial options pricing. However, the BSM model assumes that the risk-free interest rate, volatility, and equity premium…
Following the foundational work of the Black--Scholes model, extensive research has been developed to price the option by addressing its underlying assumptions and associated pricing biases. This study introduces a novel framework for…
In this paper we present a new methodology for option pricing. The main idea consists to represent a generic probability distribution function (PDF) via a perturbative expansion around a given, simpler, PDF (typically a gaussian function)…
We consider the problem of finding a consistent upper price bound for exotic options whose payoff depends on the stock price at two different predetermined time points (e.g. Asian option), given a finite number of observed call prices for…
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…
In this article, a compact finite difference method is proposed for pricing European and American options under jump-diffusion models. Partial integro-differential equation and linear complementary problem governing European and American…
This paper sets out to provide a general framework for the pricing of average-type options via lower and upper bounds. This class of options includes Asian, basket and options on the volume-weighted average price. We demonstrate that in…
The present article provides an efficient and accurate hybrid method to price American standard options in certain jump-diffusion models as well as American barrier-type options under the Black & Scholes framework. Our method generalizes…
This paper addresses an important gap in rigorous numerical treatments for pricing American options under correlated two-asset jump-diffusion models using the viscosity solution framework, with a particular focus on the Merton model. The…