Related papers: Preliminary remarks on option pricing and dynamic …
This study presents a deep reinforcement learning approach for global hedging of long-term financial derivatives. A similar setup as in Coleman et al. (2007) is considered with the risk management of lookback options embedded in guarantees…
This paper considers the pricing of long-term options on assets such as housing, where either government intervention or the economic nature of the asset is assumed to limit large falls in prices. The observed asset price is modelled by a…
We study a market model in which the volatility of the stock may jump at a random time from a fixed value to another fixed value. This model was already described in the literature. We present a new approach to the problem, based on partial…
In this paper, we focus on option pricing models based on space-time fractional diffusion. We briefly revise recent results which show that the option price can be represented in the terms of rapidly converging double-series and apply these…
The problem of European-style option pricing in time-changed L\'{e}vy models in the presence of compound Poisson jumps is considered. These jumps relate to sudden large drops in stock prices induced by political or economical hits. As the…
We consider the pricing of derivatives in a setting with trading restrictions, but without any probabilistic assumptions on the underlying model, in discrete and continuous time. In particular, we assume that European put or call options…
This paper develops a model for option market making in which the hedging activity of the market maker generates price impact on the underlying asset. The option order flow is modeled by Cox processes, with intensities depending on the…
We present an arbitrage free theoretical framework for modeling bid and ask prices of dividend paying securities in a discrete time setup using theory of dynamic acceptability indices. In the first part of the paper we develop the theory of…
Finite difference approximations to multi-asset American put option price are considered. The assets are modelled as a multi-dimensional diffusion process with variable drift and volatility. Approximation error of order one quarter with…
We present a numerically efficient approach for learning a risk-neutral measure for paths of simulated spot and option prices up to a finite horizon under convex transaction costs and convex trading constraints. This approach can then be…
The drift burst hypothesis postulates the existence of short-lived locally explosive trends in the price paths of financial assets. The recent U.S. equity and treasury flash crashes can be viewed as two high-profile manifestations of such…
Agent-based models help explain stock price dynamics as emergent phenomena driven by interacting investors. In this modeling tradition, investor behavior has typically been captured by two distinct mechanisms -- learning and heterogeneous…
During the last decade Levy processes with jumps have received increasing popularity for modelling market behaviour for both derviative pricing and risk management purposes. Chan et al. (2009) introduced the use of empirical likelihood…
The dynamics of market prices is described as the evolution of opinions in the trading community regarding future market behavior. The price then is a function of the voting process of the market players in favor to raise or reduce the…
The purpose of this work is to explore the role that arbitrage opportunities play in pricing financial derivatives. We use a non-equilibrium model to set up a stochastic portfolio, and for the random arbitrage return, we choose a stationary…
Quantum computers have the potential to provide an advantage for financial pricing problems by the use of quantum estimation. In a broader context, it is reasonable to ask about situations where the market and the assets traded on the…
We propose a new definition for tameness within the model of security prices as It\^o processes that is risk-aware. We give a new definition for arbitrage and characterize it. We then prove a theorem that can be seen as an extension of the…
We study option prices in financial markets where the risky asset prices are modelled by jump diffusions. It was proposed by Schweizer (1996) in a general semimartingale setting, following earlier works by F\"ollmer and Sondermann (1986)…
Prices in financial markets exhibit extreme jumps far more often than can be accounted for by external news. Further, magnitudes of price changes are correlated over long times. These so called stylized facts are quantified by scaling laws…
A new space-time model for interacting agents on the financial market is presented. It is a combination of the Curie-Weiss model and a space-time model introduced by J\"arpe 2005. Properties of the model are derived with focus on the…