Related papers: The Smile of certain L\'evy-type Models

We present a stochastic-local volatility model for derivative contracts on commodity futures able to describe forward-curve and smile dynamics with a fast calibration to liquid market quotes. A parsimonious parametrization is introduced to…

We introduce a simple model for equity index derivatives. The model generalizes well known L\`evy Normal Tempered Stable processes (e.g. NIG and VG) with time dependent parameters. It accurately fits Equity index implied volatility surfaces…

Motivated by the pricing of lookback options in exponential L\'evy models, we study the difference between the continuous and discrete supremum of L\'evy processes. In particular, we extend the results of Broadie et al. (1999) to…

In this paper we study short-time behavior of the at-the-money implied volatility for Inverse European options with fixed strike price. The asset price is assumed to follow a general stochastic volatility process. Using techniques of the…

We consider the problem of pricing American Exchange options driven by a L\'evy process. We study the properties of American Exchange options, we represented it as the sum of the price of the corresponding European exchange option price and…

We price European options in a class of models in which the volatility of the underlying risky asset depends on the short rate of interest. Our study results in an explicit pricing formula that depends on knowledge of a characteristic…

This paper proposes a market consistent valuation framework for variable annuities with guaranteed minimum accumulation benefit, death benefit and surrender benefit features. The setup is based on a hybrid model for the financial market and…

Estimation methods for the L\'{e}vy density of a L\'{e}vy process are developed under mild qualitative assumptions. A classical model selection approach made up of two steps is studied. The first step consists in the selection of a good…

In equity and foreign exchange markets the risk-neutral dynamics of the underlying asset are commonly represented by stochastic volatility models with jumps. In this paper we consider a dense subclass of such models and develop analytically…

In this note, we develop stock option price approximations for a model which takes both the risk o default and the stochastic volatility into account. We also let the intensity of defaults be influenced by the volatility. We show that it…

We study valuation of swing options on commodity markets when the commodity prices are driven by multiple factors. The factors are modeled as diffusion processes driven by a multidimensional L\'evy process. We set up a valuation model in…

The main purpose of this work is to examine the behavior of the implied volatility smiles around jumps, contributing to the literature with a high-frequency analysis of the smile dynamics based on intra-day option data. From our…

In this paper, we study the statistical properties of the moneyness scaling transformation by Leung and Sircar (2015). This transformation adjusts the moneyness coordinate of the implied volatility smile in an attempt to remove the…

Pure-jump L\'evy processes are popular classes of stochastic processes which have found many applications in finance, statistics or machine learning. In this paper, we propose a novel family of self-decomposable L\'evy processes where one…

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 develop a general method for derivative pricing. This approach has its roots in Shannon's Information Theory. The notion of $\lambda$-analyticity of L\'{e}vy models is introduced on the basis of which new representations of the pricing…

We consider a class of L\'evy-type processes on which spectral analysis technics can be made to produce optimal results, in particular for the decay rate of their survival probability and for the spectral gap of their ground state…

This paper develops a European option pricing formula for fractional market models. Although there exist option pricing results for a fractional Black-Scholes model, they are established without accounting for stochastic volatility. In this…

We consider option hedging in a model where the underlying follows an exponential L\'evy process. We derive approximations to the variance-optimal and to some suboptimal strategies as well as to their mean squared hedging errors. The…

In this paper we introduce an additive two-factor model for electricity futures prices based on Normal Inverse Gaussian L\'evy processes, that fulfills a no-overlapping-arbitrage (NOA) condition. We compute European option prices by Fourier…