Related papers: Recursive formula for arithmetic Asian option pric…
This paper presents a multinomial method for option pricing when the underlying asset follows an exponential Variance Gamma process. The continuous time Variance Gamma process is approximated by a discrete time Markov chain with the same…
We derive a series expansion by Hermite polynomials for the price of an arithmetic Asian option. This series requires the computation of moments and correlators of the underlying price process, but for a polynomial jump-diffusion, these are…
In this paper, we present a reduced basis method for pricing European and American options based on the Black-Scholes and Heston model. To tackle each model numerically, we formulate the problem in terms of a time dependent variational…
In this article we present a new approach to the numerical valuation of derivative securities. The method is based on our previous work where we formulated the theory of pricing in terms of tradables. The basic idea is to fit a finite…
We show how the prices of options can be determined with the help of double-fractional differential equation in such a way that their inclusion in a portfolio of stocks provides a more reliable hedge against dramatic price drops that the…
A master equation approach to the numerical solution of option pricing models is developed. The basic idea of the approach is to consider the Black--Scholes equation as the macroscopic equation of an underlying mesoscopic stochastic option…
We propose a hybrid quantum-classical algorithm, originated from quantum chemistry, to price European and Asian options in the Black-Scholes model. Our approach is based on the equivalence between the pricing partial differential equation…
In this paper, we consider option pricing in a framework of the fractional Heston-type model with $H>1/2$. As it is impossible to obtain an explicit formula for the expectation $\mathbb E f(S_T)$ in this case, where $S_T$ is the asset price…
The aim of this paper is to investigate the use of close formula approximation for pricing European mortgage options. Under the assumption of logistic duration and normal mortgage rates the underlying price at the option expiry is…
We present a new numerical method to price vanilla options quickly in time-changed Brownian motion models. The method is based on rational function approximations of the Black-Scholes formula. Detailed numerical results are given for a…
In this Article, a fast numerical numerical algorithm for pricing discrete double barrier option is presented. According to Black-Scholes model, the price of option in each monitoring date can be evaluated by a recursive formula upon the…
We establish an explicit pricing formula for the class of L\'evy-stable models with maximal negative asymmetry (Log-L\'evy model with finite moments and stability parameter $1<\alpha\leq 2$) in the form of rapidly converging series. The…
The pricing of financial derivatives, which requires massive calculations and close-to-real-time operations under many trading and arbitrage scenarios, were largely infeasible in the past. However, with the advancement of modern computing,…
Following the foundational work of the Black--Scholes model, extensive research has been developed to price the option by addressing its underlying assumptions and associated pricing biases. This study introduces a novel framework for…
We introduce a new approach for the numerical pricing of American options. The main idea is to choose a finite number of suitable excessive functions (randomly) and to find the smallest majorant of the gain function in the span of these…
Contrary to the common view that exact pricing is prohibitive owing to the curse of dimensionality, this study proposes an efficient and unified method for pricing options under multivariate Black-Scholes-Merton (BSM) models, such as the…
The general and special repo rates are related with the prices of the European call- and American put-options. The evaluation takes into account specific business models of the parties in the repo agreement and the law restrictions. Using…
We study the problem of reconstruction of special special time dependent local volatility from market prices of options with different strikes at two expiration times. For a general diffusion process we apply the linearization technique and…
This paper investigates the pricing of European-style lookback options when the price dynamics of the underlying risky asset are assumed to follow a Markov-modulated Geo-metric Brownian motion; that is, the appreciation rate and the…
The purpose of this note is to describe, in terms of a power series, the distribution function of the exponential functional, taken at some independent exponential time, of a spectrally negative L\'evy process \xi with unbounded variation.…