Related papers: The early exercise premium representation for Amer…
Characterization of the American put option price is still an open issue. From the beginning of the nineties there exists a non-closed formula for this price but nontrivial numerical computations are required to solve it. Strong efforts…
American options are financial instruments that can be exercised at any time before expiration. In this paper we study the problem of pricing this kind of derivatives within a framework in which some of the properties --volatility and…
In this paper, we extend the 3/2-model for VIX studied by Goard and Mazur (2013) and introduce the generalized 3/2 and 1/2 classes of volatility processes. Under these models, we study the pricing of European and American VIX options and,…
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…
Our goal here is to discuss the pricing problem of European and American options in discrete time using elementary calculus so as to be an easy reference for first year undergraduate students. Using the binomial model we compute the fair…
Option pricing is an integral part of modern financial risk management. The well-known Black and Scholes (1973) formula is commonly used for this purpose. This paper is an attempt to extend their work to a situation in which the…
This paper presents a derivation of the explicit price for the perpetual American put option in the Black-Scholes model, time-capped by the first drawdown epoch beyond a predefined level. We demonstrate that the optimal exercise strategy…
Pricing of high-dimensional options is one of the most important problems in Mathematical Finance. The objective of this manuscript is to present an original self-contained treatment of the multidimensional pricing. During the past decades…
This work addresses the problem of pricing American basket options in a multivariate setting, which includes among others, the Bachelier and the Black-Scholes models. In high dimensions, nonlinear partial differential equation methods for…
This paper considers utility indifference valuation of derivatives under model uncertainty and trading constraints, where the utility is formulated as an additive stochastic differential utility of both intertemporal consumption and…
In this paper we analyze American style of floating strike Asian call options belonging to the class of financial derivatives whose payoff diagram depends not only on the underlying asset price but also on the path average of underlying…
In this paper we generalize and analyze the model for pricing American-style Asian options due to (Hansen and Jorgensen 2000) by including a continuous dividend rate $q$ and a general method of averaging of the floating strike. We focus on…
American options in a multi-asset market model with proportional transaction costs are studied in the case when the holder of an option is able to exercise it gradually at a so-called mixed (randomised) stopping time. The introduction of…
In this paper, we study the dual representation for generalized multiple stopping problems, hence the pricing problem of general multiple exercise options. We derive a dual representation which allows for cashflows which are subject to…
The purpose of this paper is to analyze and compute the early exercise boundary for a class of nonlinear Black--Scholes equations with a nonlinear volatility which can be a function of the second derivative of the option price itself. A…
The purpose of this survey chapter is to present a transformation technique that can be used in analysis and numerical computation of the early exercise boundary for an American style of vanilla options that can be modelled by class of…
We analyze the regularity of the optimal exercise boundary for the American Put option when the underlying asset pays a discrete dividend at a known time $t_d$ during the lifetime of the option. The ex-dividend asset price process is…
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…
A new mathematical model for the Black-Scholes equation is proposed to forecast option prices. This model includes new interval for the price of the underlying stock as well as new initial and boundary conditions. Conventional notions of…
We consider a method of lines (MOL) approach to determine prices of European and American exchange options when underlying asset prices are modelled with stochastic volatility and jump-diffusion dynamics. As the MOL, as with any other…