Related papers: Option Pricing with Lie Symmetry Analysis and Simi…
We derive a method for finding Lie Symmetries for third-order difference equations. We use these symmetries to reduce the order of the difference equations and hence obtain the solutions of some third-order difference equations. We also…
We propose a model to quantify the effect of parameter uncertainty on the option price in the Heston model. More precisely, we present a Hamilton-Jacobi-Bellman framework which allows us to evaluate best and worst case scenarios under an…
A class of (1+1)--dimensional nonlinear boundary value problems (BVPs), modeling the process of melting and evaporation of solid materials, is studied by means of the classical Lie symmetry method. New definition of invariance in Lie's…
Many methods for reducing and simplifying differential equations are known. They provide various generalizations of the original symmetry approach of Sophus Lie. Plenty of relations between them have been noticed and in this note a unifying…
We propose a new high-order alternating direction implicit (ADI) finite difference scheme for the solution of initial-boundary value problems of convection-diffusion type with mixed derivatives and non-constant coefficients, as they arise…
We obtain exact results for fractional equations of Fokker-Planck type using evolution operator method. We employ exact forms of one-sided Levy stable distributions to generate a set of self-reproducing solutions. Explicit cases are…
In this paper we propose a new way of proving the value of a firm that is currently producing a certain product and faces the option to exit the market. The problem of optimal exiting is an optimal stopping problem, that can be solved using…
The vast majority of works on option pricing operate on the assumption of risk neutral valuation, and consequently focus on the expected value of option returns, and do not consider risk parameters, such as variance. We show that it is…
We study indifference pricing of exotic derivatives by using hedging strategies that take static positions in quoted derivatives but trade the underlying and cash dynamically over time. We use real quotes that come with bid-ask spreads and…
We introduce a new Self-Organized Criticality (SOC) model for simulating price evolution in an artificial financial market, based on a multilayer network of traders. The model also implements, in a quite realistic way with respect to…
This survey is an introduction to asymptotic methods for portfolio-choice problems with small transaction costs. We outline how to derive the corresponding dynamic programming equations and simplify them in the small-cost limit. This allows…
We study the pricing and hedging of European spread options on correlated assets when, in contrast to the standard framework and consistent with imperfect liquidity markets, the trading in the stock market has a direct impact on stocks…
We develop a mixed least squares Monte Carlo-partial differential equation (LSMC-PDE) method for pricing Bermudan style options on assets whose volatility is stochastic. The algorithm is formulated for an arbitrary number of assets and…
The Lie symmetry analysis for the study of a $1+n~$fourth-order Schr\"{o}dinger equation inspired by the modification of the deformation algebra in the presence of a minimum length is applied. Specifically, we perform a detailed…
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…
We calculate all point symmetries of the Fokker - Planck equation in one-dimensional Euclidean space. General expression of symmetry group action on arbitrary solution of Fokker - Planck equation is presented. We propose new notation for…
New simulation approaches to evaluating path-dependent options without matrix inversion issues nor Euler bias are evaluated. They employ three main contributions: Stochastic approximation replaces regression in the LSM algorithm; Explicit…
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,…
This paper discusses the connection between mathematical finance and statistical modelling which turns out to be more than a formal mathematical correspondence. We like to figure out how common results and notions in statistics and their…
We construct the closed form solution of an elastic beam with axial load using Lie symmetry method. A beam with spatially varying physical properties such as mass and second moment of inertia is considered. The governing fourth order…