Related papers: The pricing formula for cancellable European optio…
In this note we discuss - in what is intended to be a pedagogical fashion - FX option pricing in target zones with attainable boundaries. The boundaries must be reflecting. The no-arbitrage requirement implies that the differential (foreign…
This paper investigates problems associated with the valuation of callable American volatility put options. Our approach involves modeling volatility dynamics as a mean-reverting 3/2 volatility process. We first propose a pricing formula…
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…
A stochastic model for pure-jump diffusion (the compound renewal process) can be used as a zero-order approximation and as a phenomenological description of tick-by-tick price fluctuations. This leads to an exact and explicit general…
The virtue of an American option is that it can be exercised at any time. This right is particularly valuable when there is model uncertainty. Yet almost all the extensive literature on American options assumes away model uncertainty. This…
A new framework for pricing the European currency option is developed in the case where the spot exchange rate fellows a time-changed fractional Brownian motion. An analytic formula for pricing European foreign currency option is proposed…
The mean objective of this paper is to derive an explicit formula for a price of an European option associated to the underlying delayed stock price which follows a linear differential equation with a general delay in the drift term. We use…
We derive the implied volatility estimation formula in European power call options pricing, where the payoff functions are in the form of $V=(S^{\alpha}_T-K)^{+}$ and $V=(S^{\alpha}_T-K^{\alpha})^{+}$ ($\alpha>0$)respectively. Using…
A version of indifference valuation of a European call option is proposed that includes statistical regularities of nonstochastic randomness. Classical relations (forward contract value and Black-Scholes formula) are obtained as particular…
In this paper we reformulate the problem of pricing options in a quantum setting. Our proposed algorithm involves preparing an initial state, representing the option price, and then evolving it using existing imaginary time simulation…
Proof that under simple assumptions, such as constraints of Put-Call Parity, the probability measure for the valuation of a European option has the mean derived from the forward price which can, but does not have to be the risk-neutral one,…
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…
Optimal pricing of European call option is described by linear stochastic differential equation. Trading strategy given by a twin of stochastic variables was integrated w.r.t. Black-Scholes formula to adopt optimal pricing to tarading…
We consider the superhedging price of an exotic option under nondominated model uncertainty in discrete time in which the option buyer chooses some action from an (uncountable) action space at each time step. By introducing an enlarged…
Refining a discrete model of Cheuk and Vorst we obtain a closed formula for the price of a European lookback option at any time between emission and maturity. We derive an asymptotic expansion of the price as the number of periods tends to…
In this paper, we show that the price of an European call option, whose underlying asset price is driven by the space-time fractional diffusion, can be expressed in terms of rapidly convergent double-series. The series formula can be…
Advertising options have been recently studied as a special type of guaranteed contracts in online advertising, which are an alternative sales mechanism to real-time auctions. An advertising option is a contract which gives its buyer a…
Pricing of European basket call option with n-assets and a bond is discussed in this paper, where all prices of n-assets and the bond are driven by Exponential Ornstein-Uhlenbeck processes. The close-form of European basket option pricing…
We investigate upper and lower hedging prices of multivariate contingent claims from the viewpoint of game-theoretic probability and submodularity. By considering a game between "Market" and "Investor" in discrete time, the pricing problem…
The accurate valuation of financial derivatives plays a pivotal role in the finance industry. Although closed formulas for pricing are available for certain models and option types, exemplified by the European Call and Put options in the…