Related papers: Pricing American options via multi-level approxima…
In this paper we propose a semi-analytic approach to pricing American options for time-dependent jump-diffusions models with exponential jumps The idea of the method is to further generalize our approach developed for pricing barrier,…
This paper addresses an important gap in rigorous numerical treatments for pricing American options under correlated two-asset jump-diffusion models using the viscosity solution framework, with a particular focus on the Merton model. The…
We develop a practical framework for identifying and quantifying the hidden layers of risks and optionality embedded in American options by introducing stochasticity into one or more of their underlying determinants. The heuristic approach…
We consider options that pay the complexity deficiency of a sequence of up and down ticks of a stock upon exercise. We study the price of European and American versions of this option numerically for automatic complexity, and theoretically…
We consider high-dimensional asset price models that are reduced in their dimension in order to reduce the complexity of the problem or the effect of the curse of dimensionality in the context of option pricing. We apply model order…
This paper covers a massive acceleration of Monte-Carlo based pricing method for financial products and financial derivatives. The method is applicable in risk management settings, where a financial product has to be priced under a number…
The subject of this study is an iterative Bermudan option pricing algorithm based on (high-dimensional) cubature. We show that the sequence of Bermudan prices (as functions of the underlying assets' logarithmic start prices) resulting from…
An analytic method for pricing American call options is provided; followed by an empirical method for pricing Asian call options. The methodology is the pricing theory presented in "A Modern Theory of Random Variation", by Patrick…
This paper is concerned with the solution of the optimal stopping problem associated to the valuation of Perpetual American options driven by continuous time Markov chains. We introduce a new dynamic approach for the numerical pricing of…
There is a vast literature on numerical valuation of exotic options using Monte Carlo, binomial and trinomial trees, and finite difference methods. When transition density of the underlying asset or its moments are known in closed form, it…
We introduce a new method to price American-style options on underlying investments governed by stochastic volatility (SV) models. The method does not require the volatility process to be observed. Instead, it exploits the fact that the…
We present the method of moments approach to pricing barrier-type options when the underlying is modelled by a general class of jump diffusions. By general principles the option prices are linked to certain infinite dimensional linear…
Despite significant advancements in machine learning for derivative pricing, the efficient and accurate valuation of American options remains a persistent challenge due to complex exercise boundaries, near-expiry behavior, and intricate…
We present a new approximation scheme for the price and exercise policy of American options. The scheme is based on Hermite polynomial expansions of the transition density of the underlying asset dynamics and the early exercise premium…
This paper develops general approaches for pricing various types of American-style Parisian options (down-in/-out, perpetual/finite-maturity) with general payoff functions based on continuous-time Markov chain (CTMC) approximation under…
In this paper we extend Buchen's method to develop a new technique for pricing of some exotic options with several expiry dates(more than 3 expiry dates) using a concept of higher order binary option. At first we introduce the concept of…
This study investigates the application of machine learning algorithms, particularly in the context of pricing American options using Monte Carlo simulations. Traditional models, such as the Black-Scholes-Merton framework, often fail to…
Developments in finance industry and academic research has led to innovative financial products. This paper presents an alternative approach to price American options. Our approach utilizes famous \cite{heath1992bond} ("HJM") technique to…
In this paper we study recent developments in the approximation of the spread option pricing. As the Kirk\'s Approximation is extremely flawed in the cases when the correlation is very high, we explore a recent development that allows…
A new approximate Bayesian inferential framework is proposed that exploits multiple information sources -- daily spot returns, high-frequency spot data and option prices -- and enables fast calculation of probabilistic predictions of future…