Related papers: Robust price bounds for the forward starting strad…
In this paper we show how to approximate a Heath-Jarrow-Morton dynamics for the forward prices in commodity markets with arbitrage-free models which have a finite dimensional state space. Moreover, we recover a closed form representation of…
We consider rough stochastic volatility models where the driving noise of volatility has fractional scaling, in the "rough" regime of Hurst parameter $H < 1/2$. This regime recently attracted a lot of attention both from the statistical and…
In this paper, we study the pricing of contingent claims under G-expectation. In order to accomodate volatility uncertainty, the price of the risky security is supposed to governed by a general linear stochastic differential equation (SDE)…
This paper considers a mortgage contract where the borrower pays a fixed mortgage rate and has the choice of making prepayment. Assume the market interest follows the CIR model, a free boundary problem is formulated. Here we focus on the…
There exist several methods how more general options can be priced with call prices. In this article, we extend these results to cover a wider class of options and market models. In particular, we introduce a new pricing formula which can…
We combine forward investment performance processes and ambiguity averse portfolio selection. We introduce the notion of robust forward criteria which addresses the issues of ambiguity in model specification and in preferences and…
This paper presents the Runge-Kutta-Legendre finite difference scheme, allowing for an additional shift in its polynomial representation. A short presentation of the stability region, comparatively to the Runge-Kutta-Chebyshev scheme…
Flexible ramping products (FRPs) emerge as a promising instrument for addressing steep and uncertain ramping needs through market mechanisms. Initial implementations of FRPs in North American electricity markets, however, revealed several…
This paper introduces a no-arbitrage, Monte Carlo-free approach to pricing path-dependent interest rate derivatives. The Heath-Jarrow-Morton model gives arbitrage-free contingent claims prices but is infinite-dimensional, making traditional…
We propose a framework to study optimal trading policies in a one-tick pro-rata limit order book, as typically arises in short-term interest rate futures contracts. The high-frequency trader has the choice to trade via market orders or…
We derive a backward and forward nonlinear PDEs that govern the implied volatility of a contingent claim whenever the latter is well-defined. This would include at least any contingent claim written on a positive stock price whose payoff at…
Consider an American option that pays G(X^*_t) when exercised at time t, where G is a positive increasing function, X^*_t := \sup_{s\le t}X_s, and X_s is the price of the underlying security at time s. Assuming zero interest rates, we show…
We consider the pricing problem related to payoffs that can have discontinuities of polynomial growth. The asset price dynamic is modeled within the Black and Scholes framework characterized by a stochastic volatility term driven by a…
We give a complete solution to the problem of minimizing the expected liquidity costs in presence of a general drift when the underlying market impact model has linear transient price impact with exponential resilience. It turns out that…
The price of a stock will rarely follow the assumed model and a curious investor or a Regulatory Authority may wish to obtain a probability model the prices support. A risk neutral probability ${\cal P}^*$ for the stock's price at time $T$…
This research extends the conventional concepts of the bid--ask spread (BAS) and mid-price to include the total market order book bid--ask spread (TMOBBAS) and the global mid-price (GMP). Using high-frequency trading data, we investigate…
We derive a new high-order compact finite difference scheme for option pricing in stochastic volatility models. The scheme is fourth-order accurate in space and second-order accurate in time. Under some restrictions, theoretical results…
In this paper, we explore the short- and long-term stability of backed stablecoins offering constant mint and redeem prices to all agents. We refer to such designs as price window-based, since the mint and redeem prices constrain the…
We show how inter-asset dependence information derived from market prices of options can lead to improved model-free price bounds for multi-asset derivatives. Depending on the type of the traded option, we either extract correlation…
We consider a financial model with permanent price impact. Continuous time trading dynamics are derived as the limit of discrete rebalancing policies. We then study the problem of super-hedging a European option. Our main result is the…