Related papers: Valuation and parities for exchange options
Three extensions and reinterpretations of nonclassical probabilities are reviewed. (i) We propose to generalize the probability axiom of quantum mechanics to self-adjoint positive operators of trace one. Furthermore, we discuss the…
We propose a novel kinetic exchange model differing from previous ones in two main aspects. First, the basic dynamics is modified in order to represent economies where immediate wealth exchanges are carried out, instead of reshufflings or…
Given a finite set of European call option prices on a single underlying, we want to know when there is a market model which is consistent with these prices. In contrast to previous studies, we allow models where the underlying trades at a…
In this paper we extend the theory of option pricing to take into account and explain the empirical evidence for asset prices such as non-Gaussian returns, long-range dependence, volatility clustering, non-Gaussian copula dependence, as…
In this paper, we obtain asymptotic formulas with error estimates for the implied volatility associated with a European call pricing function. We show that these formulas imply Lee's moment formulas for the implied volatility and the…
The Black-Scholes model (sometimes known as the Black-Scholes-Merton model) gives a theoretical estimate for the price of European options. The price evolution under this model is described by the Black-Scholes formula, one of the most…
This paper considers utility indifference valuation of derivatives under model uncertainty and trading constraints, where the utility is formulated as an additive stochastic differential utility of both intertemporal consumption and…
We study an American option pricing problem with liquidity risks and transaction fees. As endogenous transaction costs, liquidity risks of the underlying asset are modeled by a mean-reverting process. Transaction fees are exogenous…
In this paper the Buchen's pricing formulae of (higher order) asset and bond binary options are incorporated into the pricing formula of power binary options and a pricing formula of "the normal distribution standard options" with the…
The present article provides an efficient and accurate hybrid method to price American standard options in certain jump-diffusion models as well as American barrier-type options under the Black & Scholes framework. Our method generalizes…
In this paper we analyze American style of floating strike Asian call options belonging to the class of financial derivatives whose payoff diagram depends not only on the underlying asset price but also on the path average of underlying…
In this paper we discuss the basket options valuation for a jump-diffusion model. The underlying asset prices follow some correlated local volatility diffusion processes with systematic jumps. We derive a forward partial integral…
We derive asymptotic expansions for the prices of a variety of European and barrier-style claims in a general local-stochastic volatility setting. Our method combines Taylor series expansions of the diffusion coefficients with an expansion…
A risk-neutral valuation framework is developed for pricing and hedging in-play football bets based on modelling scores by independent Poisson processes with constant intensities. The Fundamental Theorems of Asset Pricing are applied to…
The present article studies geometric step options in exponential L\'evy markets. Our contribution is manifold and extends several aspects of the geometric step option pricing literature. First, we provide symmetry and parity relations and…
The pricing of options, warrants and other derivative securities is one of the great success of financial economics. These financial products can be modeled and simulated using quantum mechanical instruments based on a Hamiltonian…
Hamiltonian approach in quantum mechanics provides a new thinking for barrier option pricing. For proportional floating barrier step options, the option price changing process is similar to the one dimensional trapezoid potential barrier…
In this paper, we are presenting a method for estimation of market parameters modeled by jump diffusion process. The method proposed is based on Gibbs sampler, while the market parameters are the drift, the volatility, the jump intensity…
This paper sets out to provide a general framework for the pricing of average-type options via lower and upper bounds. This class of options includes Asian, basket and options on the volume-weighted average price. We demonstrate that in…
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…