Related papers: Optimal robust bounds for variance options
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…
In this study, we propose a new formula for spread option pricing with the dependence of two assets described by a copula function. The advantage of the proposed method is that it requires only the numerical evaluation of a one-dimensional…
We investigate robust linear consensus over networks under capacity-constrained communication. The capacity of each edge is encoded as an upper bound on the number of state variables that can be communicated instantaneously. When the edge…
In this paper, we develop econometric tools to analyze the integrated volatility of the efficient price and the dynamic properties of microstructure noise in high-frequency data under general dependent noise. We first develop consistent…
We consider decision-making problems under decision-dependent uncertainty (DDU), where the distribution of uncertain parameters depends on the decision variables and is only observable through a finite offline dataset. To address this…
A parsimonious generalization of the Heston model is proposed where the volatility-of-volatility is assumed to be stochastic. We follow the perturbation technique of Fouque et al (2011, CUP) to derive a first order approximation of the…
Motivated by the model- independent pricing of derivatives calibrated to the real market, we consider an optimization problem similar to the optimal Skorokhod embedding problem, where the embedded Brownian motion needs only to reproduce a…
Breakability rate of fragile item depends on the accumulated stress of heaped stock level. So breakablility rate can be considered as dependent parameter of stock variable. The unit production cost is a function of production rate and also…
In this paper, we study an optimal stopping problem in the presence of model uncertainty and regime switching. The max-min formulation for robust control and the dynamic programming approach are adopted to establish a general theoretical…
This paper focuses on the pricing of the variance swap in an incomplete market where the stochastic interest rate and the price of the stock are respectively driven by Cox-Ingersoll-Ross model and Heston model with simultaneous L\'{e}vy…
This paper studies the valuation and optimal strategy of convertible bonds as a Dynkin game by using the reflected backward stochastic differential equation method and the variational inequality method. We first reduce such a Dynkin game to…
We solve the problem of super-hedging European or Asian options for discrete-time financial market models where executable prices are uncertain. The risky asset prices are not described by single-valued processes but measurable selections…
Paper is based on "The cost of illiquidity and its effects on hedging", L. C. G. Rogers and Surbjeet Singh, 2010. We generalize its thesis to constant elasticity model, which own previously used Black-Schoels model as a special case. The…
This paper derives a new semi closed-form approximation formula for pricing an up-and-out barrier option under a certain type of stochastic volatility model including SABR model by applying a rigorous asymptotic expansion method developed…
In financial markets, accurately measuring the risk of future fluctuations in asset prices is of paramount importance. Studies such as Carr and Madan have shown that the expected value of the quadratic variation of log prices can be…
We obtain distribution-free bounds for various fundamental quantities used in probability theory by solving optimization problems that search for extreme distributions among all distributions with the same mean and dispersion. These…
We consider the pricing of derivatives written on the discretely sampled realized variance of an underlying security. In the literature, the realized variance is usually approximated by its continuous-time limit, the quadratic variation of…
The Heston stochastic volatility model is a standard model for valuing financial derivatives, since it can be calibrated using semi-analytical formulas and captures the most basic structure of the market for financial derivatives with…
In the option valuation literature, the shortcomings of one factor stochastic volatility models have traditionally been addressed by adding jumps to the stock price process. An alternate approach in the context of option pricing and…
We consider the pricing of derivatives in a setting with trading restrictions, but without any probabilistic assumptions on the underlying model, in discrete and continuous time. In particular, we assume that European put or call options…