Related papers: Pricing TARN Using a Finite Difference Method
In this paper, finite element method is applied to Leland's model for numerical simulation of option pricing with transaction costs. Spatial finite element models based on P1 and/or P2 elements are formulated in combination with a…
We developed a replica exchange method that is effectively parallelizable even if the computational cost of the Monte Carlo moves in the parallel replicas are considerably different, for instance, because the replicas run on different type…
The optimal stopping problem is a category of decision problems with a specific constrained configuration. It is relevant to various real-world applications such as finance and management. To solve the optimal stopping problem,…
In this article we propose a novel approach to reduce the computational complexity of various approximation methods for pricing discrete time American options. Given a sequence of continuation values estimates corresponding to different…
Pricing a multi-asset derivative is an important problem in financial engineering, both theoretically and practically. Although it is suitable to numerically solve partial differential equations to calculate the prices of certain types of…
In this paper, a standard PDE for the pricing of arithmetic average strike Asian call option is presented. A Crank-Nicolson Implicit Method and a Higher Order Compact finite difference scheme for this pricing problem is derived. Both these…
In this work, we extend the hybrid Chernoff tau-leap method to the multilevel Monte Carlo (MLMC) setting. Inspired by the work of Anderson and Higham on the tau-leap MLMC method with uniform time steps, we develop a novel algorithm that is…
An adaptive finite difference scheme for variable-order fractional-time subdiffusion equations in the Caputo form is studied. The fractional time derivative is discretized by the L1 procedure but using nonhomogeneous timesteps. The size of…
In this paper we will develop a methodology for obtaining pricing expressions for financial instruments whose underlying asset can be described through a simple continuous-time random walk (CTRW) market model. Our approach is very natural…
Recombinant binomial trees are binary trees where each non-leaf node has two child nodes, but adjacent parents share a common child node. Such trees arise in finance when pricing an option. For example, valuation of a European option can be…
A new computational method for finite-temperature properties of strongly correlated electrons is proposed by extending the variational Monte Carlo method originally developed for the ground state. The method is based on the path integral in…
This paper studies a discrete-time optimal switching problem on a finite horizon. The underlying model has a running reward, terminal reward and signed (positive and negative) switching costs. Using the martingale approach to optimal…
Constant Proportion Portfolio Insurance (CPPI) is a strategy designed to give participation in a risky asset while protecting the invested capital. Some gap risk due to extreme events is often kept by the issuer of the product: a put option…
We introduce a novel signature approach for pricing and hedging path-dependent options with instantaneous and permanent market impact under a mean-quadratic variation criterion. Leveraging the expressive power of signatures, we recast an…
In this paper, we derive closed-form formulas of first-order approximation for down-and-out barrier and floating strike lookback put option prices under a stochastic volatility model, by using an asymptotic approach. To find the explicit…
We apply rough-path theory to study the discrete-time gamma-hedging strategy. We show that if a trader knows that the market price of a set of European options will be given by a diffusive pricing model, then the discrete-time gamma-hedging…
We propose a top-down model for cash CLO. This model can consistently price cash CLO tranches both within the same deal and across different deals. Meaningful risk measures for cash CLO tranches can also be defined and computed. This method…
Recent studies have shown that fractional calculus is an effective alternative mathematical tool in various scientific fields. However, some investigations indicate that results established in differential and integral calculus do not…
We consider the pricing of derivatives written on accumulated marks, such as weather derivatives or aggregate loss claims, using a self-exciting marked point process. The jump intensity mean-reverts between events and increases at jump…
The purpose of this paper is to introduce a new Markov chain Monte Carlo method and exhibit its efficiency by simulation and high-dimensional asymptotic theory. Key fact is that our algorithm has a reversible proposal transition kernel,…