Related papers: A CDS Option Miscellany
We investigate upper and lower hedging prices of multivariate contingent claims from the viewpoint of game-theoretic probability and submodularity. By considering a game between "Market" and "Investor" in discrete time, the pricing problem…
This article explores the relationship between the SPX and VIX options markets. High-strike VIX call options are used to hedge tail risk in the SPX, which means that SPX options are a reflection of the extreme-strike asymptotics of VIX…
The purpose of the paper is to present a new pricing method for clean spread options, and to illustrate its main features on a set of numerical examples produced by a dedicated computer code. The novelty of the approach is embedded in the…
In this paper we propose a closed-form approximation for the price of basket options under a multivariate Black-Scholes model, based on Taylor expansions and the calculation of mixed exponential-power moments of a Gaussian distribution. Our…
In this paper, a new numerical method based on adaptive gradient descent optimizers is provided for computing the implied volatility from the Black-Scholes (B-S) option pricing model. It is shown that the new method is more accurate than…
The plethora of comparison shopping agents (CSAs) in today's markets enables buyers to query more than a single CSA when shopping, and an inter-CSAs competition naturally arises. We suggest a new approach, termed "selective price…
\begin{abstract} The aim of this paper is to study the spanning power of options in a static financial market that allows non-integrable assets. Our findings extend and unify the results in [8,9,18] for $L_p$-models. We also apply the…
Continuous time models in the theory of real options give explicit formulas for optimal exercise strategies when options are simple and the price of an underlying asset follows a geometric Brownian motion. This paper suggests a general,…
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…
In this work we want to provide a general principle to evaluate the CVA (Credit Value Adjustment) for a vulnerable option, that is an option subject to some default event, concerning the solvability of the issuer. CVA is needed to evaluate…
Two novel closed-form formulas for the price of barrier options in stochastic volatility models with zero interest rate and dividend yield but nonzero correlation between the asset and its instantaneous volatility are derived. The first is…
The aim of this paper is to introduce an insurance model allowing reinsurance and dividend payment. Our model deals with several homogeneous contracts and takes into account the legislation regarding the provisions to be justified by the…
We consider closed-form approximations for European put option prices within the Heston and GARCH diffusion stochastic volatility models with time-dependent parameters. Our methodology involves writing the put option price as an expectation…
The presence of variable renewable energy resources with uncertain outputs in day-ahead electricity markets results in additional balancing needs in real-time. Addressing those needs cost-effectively and reliably within a competitive market…
Subdiffusion is a well established phenomenon in physics. In this paper we apply the subdiffusive dynamics to analyze financial markets. We focus on the financial aspect of time fractional diffusion model with moving boundary i.e. American…
We consider dynamic sublinear expectations (i.e., time-consistent coherent risk measures) whose scenario sets consist of singular measures corresponding to a general form of volatility uncertainty. We derive a c\`adl\`ag nonlinear…
This work studies the valuation of currency options in markets suffering from a financial crisis. We consider a European option where the underlying asset is a foreign currency. We assume that the value of the underlying asset is a…
We introduce a local volatility model for the valuation of options on commodity futures by using European vanilla option prices. The corresponding calibration problem is addressed within an online framework, allowing the use of multiple…
Reliability Options are capacity remuneration mechanisms aimed at enhancing security of supply in electricity systems. They can be framed as call options on electricity sold by power producers to System Operators. This paper provides a…
Pricing of high-dimensional options is one of the most important problems in Mathematical Finance. The objective of this manuscript is to present an original self-contained treatment of the multidimensional pricing. During the past decades…