Related papers: Bridge Copula Model for Option Pricing
We consider the computation of model-free bounds for multi-asset options in a setting that combines dependence uncertainty with additional information on the dependence structure. More specifically, we consider the setting where the…
This paper presents a new model for pricing financial derivatives subject to collateralization. It allows for collateral arrangements adhering to bankruptcy laws. As such, the model can back out the market price of a collateralized…
We study markets with no riskless (safe) asset. We derive the corresponding Black-Scholes-Merton option pricing equations for markets where there are only risky assets which have the following price dynamics: (i) continuous diffusions; (ii)…
We consider robust pricing and hedging for options written on multiple assets given market option prices for the individual assets. The resulting problem is called the multi-marginal martingale optimal transport problem. We propose two…
We propose a new semiparametric approach for modelling nonlinear univariate diffusions, where the observed process is a nonparametric transformation of an underlying parametric diffusion (UPD). This modelling strategy yields a general class…
We construct a sequence of functions that uniformly converge (on compact sets) to the price of Asian option, which is written on a stock whose dynamics follows a jump diffusion, exponentially fast. Each of the element in this sequence…
Despite significant advancements in machine learning for derivative pricing, the efficient and accurate valuation of American options remains a persistent challenge due to complex exercise boundaries, near-expiry behavior, and intricate…
We construct a statistical indicator for the detection of short-term asset price bubbles based on the information content of bid and ask market quotes for plain vanilla put and call options. Our construction makes use of the martingale…
Pricing of exotic financial derivatives, such as Asian and multi-asset American basket options, poses significant challenges for standard numerical methods such as binomial trees or Monte Carlo methods. While the former often scales…
The latter author, together with collaborators, proposed a numerical scheme to calculate the price of barrier options. The scheme is based on a symmetrization of diffusion process. The present paper aims to give a mathematical credit to the…
In this paper, we present a two-stage stochastic international portfolio optimisation model to find an optimal allocation for the combination of both assets and currency hedging positions. Our optimisation model allows a "currency overlay",…
We describe the pricing and hedging of financial options without the use of probability using rough paths. By encoding the volatility of assets in an enhancement of the price trajectory, we give a pathwise presentation of the replication of…
In usual stochastic volatility models, the process driving the volatility of the asset price evolves according to an autonomous one-dimensional stochastic differential equation. We assume that the coefficients of this equation are smooth.…
We introduce a new set of consistent measures of risks, in terms of the semi-invariants of pdf's, such that the centered moments and the cumulants of the portfolio distribution of returns that put more emphasis on the tail the…
Thanks to their ability to capture complex dependence structures, copulas are frequently used to glue random variables into a joint model with arbitrary marginal distributions. More recently, they have been applied to solve statistical…
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…
Multivariate volatility modeling and forecasting are crucial in financial economics. This paper develops a copula-based approach to model and forecast realized volatility matrices. The proposed copula-based time series models can capture…
In this work, we propose an algorithm to price American options by directly solving the dual minimization problem introduced by Rogers. Our approach relies on approximating the set of uniformly square integrable martingales by a finite…
We consider the jump-diffusion risky asset model and study its conditional prediction laws. Next, we explain the conditional least square hedging strategy and calculate its closed form for the jump-diffusion model, considering the…
We study the problem of unbiased estimation of expectations with respect to (w.r.t.) $\pi$ a given, general probability measure on $(\mathbb{R}^d,\mathcal{B}(\mathbb{R}^d))$ that is absolutely continuous with respect to a standard Gaussian…