Related papers: Bridge Copula Model for Option Pricing
We propose a novel algorithm which allows to sample paths from an underlying price process in a local volatility model and to achieve a substantial variance reduction when pricing exotic options. The new algorithm relies on the construction…
In this article, a three-time levels compact scheme is proposed to solve the partial integro-differential equation governing the option prices under jump-diffusion models. In the proposed compact scheme, the second derivative approximation…
Fast pricing of American-style options has been a difficult problem since it was first introduced to financial markets in 1970s, especially when the underlying stocks' prices follow some jump-diffusion processes. In this paper, we propose a…
This paper presents a multinomial method for option pricing when the underlying asset follows an exponential Variance Gamma process. The continuous time Variance Gamma process is approximated by a discrete time Markov chain with the same…
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…
This dissertation develops and justifies a novel method for deriving approximate formulas to estimate two parameters in stochastic volatility diffusion models with exponentially-affine characteristic functions and single- or two-factor…
This paper examines the problem of pricing spread options under some models with jumps driven by Compound Poisson Processes and stochastic volatilities in the form of Cox-Ingersoll-Ross(CIR) processes. We derive the characteristic function…
This paper covers a massive acceleration of Monte-Carlo based pricing method for financial products and financial derivatives. The method is applicable in risk management settings, where a financial product has to be priced under a number…
This paper presents the solution to a European option pricing problem by considering a regime-switching jump diffusion model of the underlying financial asset price dynamics. The regimes are assumed to be the results of an observed pure…
We propose a novel distributional regression model for a multivariate response vector based on a copula process over the covariate space. It uses the implicit copula of a Gaussian multivariate regression, which we call a ``regression…
Financial derivatives pricing aims to find the fair value of a financial contract on an underlying asset. Here we consider option pricing in the partial differential equations framework. The contemporary models lead to one-dimensional or…
In this paper I develop a new computational method for pricing path dependent options. Using the path integral representation of the option price, I show that in general it is possible to perform analytically a partial averaging over the…
This paper presents a novel approach to pricing American options using piecewise diffusion Markov processes (PDifMPs), a type of generalised stochastic hybrid system that integrates continuous dynamics with discrete jump processes. Standard…
A new framework for asset price dynamics is introduced in which the concept of noisy information about future cash flows is used to derive the price processes. In this framework an asset is defined by its cash-flow structure. Each cash flow…
Improved bounds on the copula of a bivariate random vector are computed when partial information is available, such as the values of the copula on a given subset of $[0,1]^2$, or the value of a functional of the copula, monotone with…
The quanto option is a cross-currency derivative in which the pay-off is given in foreign currency and then converted to domestic currency, through a constant exchange rate, used for the conversion and determined at contract inception.…
In this paper we present a novel approach for firm default probability estimation. The methodology is based on multivariate contingent claim analysis and pair copula constructions. For each considered firm, balance sheet data are used to…
In the paper, we use and investigate copulas models to represent multivariate dependence in financial time series. We propose the algorithm of risk measure computation using copula models. Using the optimal mean-$CVaR$ portfolio we compute…
We price European and American exchange options where the underlying asset prices are modelled using a Merton (1976) jump-diffusion with a common Heston (1993) stochastic volatility process. Pricing is performed under an equivalent…
In this paper we propose a novel dual regression-based approach for pricing American options. This approach reduces the complexity of the nested Monte Carlo method and has especially simple form for time discretised diffusion processes. We…