Related papers: Heat kernel methods in finance: the SABR model
A non-relativistic quantum model is considered with a point particle carrying a charge $e$ and moving on the plane pierced by two infinitesimally thin Aharonov-Bohm solenoids and subjected to a perpendicular uniform magnetic field of…
Earlier in the study of the combinatorial properties of the heat kernel of Laplace operator with covariant derivative diagram technique and matrix formalism were constructed. In particular, this formalism allows you to control the…
This paper derives a new semi closed-form approximation formula for pricing an up-and-out barrier option under a certain type of stochastic volatility model including SABR model by applying a rigorous asymptotic expansion method developed…
We construct default-free interest rate models in the spirit of the well-known Markov funcional models: our focus is analytic tractability of the models and generality of the approach. We work in the setting of state price densities and…
The heat kernel associated with an elliptic second-order partial differential operator of Laplace type acting on smooth sections of a vector bundle over a Riemannian manifold, is studied. A general manifestly covariant method for…
Volatility Skew and Smile of Interest Rate products (Swaption and Caplet) are represented by SABR (Stochastic Alpha Beta Rho model). So, the Interest Rate derivatives model for pricing the callable exotic swaps should be comparable to the…
This paper is devoted to obtain closed form solutions for the semiclassical (or WKB) approximation of the heat kernel propagator of the diffusion equation defined by the constant elasticity variance (CEV) option pricing model. One of the…
We propose an efficient, accurate and reliable simulation scheme for the stochastic-alpha-beta-rho (SABR) model. The two challenges of the SABR simulation lie in sampling (i) integrated variance conditional on terminal volatility and (ii)…
The heat kernel expansion is a very convenient tool for studying one-loop divergences, anomalies and various asymptotics of the effective action. The aim of this report is to collect useful information on the heat kernel coefficients…
In this article, we describe a geometric method to study cusp forms, which relies on heat kernel and Bergman kernel analysis. This new approach of applying techniques coming from analytic geometry is based on the micro-local analysis of the…
In this paper, we study the geometry associated with Schroedinger operator via Hamiltonian and Lagrangian formalism. Making use of a multiplier technique, we construct the heat kernel with the coefficient matrices of the operator both…
We consider rough metrics on smooth manifolds and corresponding Laplacians induced by such metrics. We demonstrate that globally continuous heat kernels exist and are H\"older continuous locally in space and time. This is done via local…
We give a short overview of the effective action approach in quantum field theory and quantum gravity and describe various methods for calculation of the asymptotic expansion of the heat kernel for second-order elliptic partial differential…
A diagramatic heat kernel expansion technique is presented. The method is especially well suited to the small-derivative expansion of the heat kernel, but it can also be used to reproduce the results obtained by the approach known as…
The stochastic-alpha-beta-rho (SABR) model has been widely adopted in options trading. In particular, the normal ($\beta=0$) SABR model is a popular model choice for interest rates because it allows negative asset values. The option price…
We consider a heat kernel approach for the development of stochastic pricing kernels. The kernels are constructed by positive propagators, which are driven by time-inhomogeneous Markov processes. We multiply such a propagator with a…
Spectral kernel methods are techniques for transforming data into a coordinate system that efficiently reveals the geometric structure - in particular, the "connectivity" - of the data. These methods depend on certain tuning parameters. We…
Developed turbulent motion of fluid still lacks an analytical description despite more than a century of active research. Nowadays phenomenological ideas are widely used in practical applications, such as small-scale closures for numerical…
We present analytical methods to calculate the magnetic response of non-interacting electrons constrained to a domain with boundaries and submitted to a uniform magnetic field. Two different methods of calculation are considered - one…
In 'A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options', Heston proposes a Stochastic Volatility (SV) model with constant interest rate and derives a semi-explicit valuation formula.…