Related papers: Pricing and Hedging Basket Options with Exact Mome…
In this paper we derive an easily computed approximation to European basket call prices for a local volatility jump-diffusion model. We apply the asymptotic expansion method to find the approximate value of the lower bound of European…
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,…
In this work we are concerned with valuing optionalities associated to invest or to delay investment in a project when the available information provided to the manager comes from simulated data of cash flows under historical (or…
The pricing, hedging, optimal exercise and optimal cancellation of game or Israeli options are considered in a multi-currency model with proportional transaction costs. Efficient constructions for optimal hedging, cancellation and exercise…
In this article, we introduce an algorithm called Backward Hedging, designed for hedging European and American options while considering transaction costs. The optimal strategy is determined by minimizing an appropriate loss function, which…
We develop a numerical method for pricing multidimensional vanilla options in the Black-Scholes framework. In low dimensions, we improve an adaptive integration algorithm proposed by two of the authors by introducing a new splitting…
We consider the problem of computing upper and lower bounds on the price of a European basket call option, given prices on other similar baskets. We focus here on an interpretation of this program as a generalized moment problem. Recent…
A new approximate Bayesian inferential framework is proposed that exploits multiple information sources -- daily spot returns, high-frequency spot data and option prices -- and enables fast calculation of probabilistic predictions of future…
We evaluate the hedging performance of a high-order compact finite difference scheme from [4] for option pricing in Bates model. We compare the scheme's hedging performance to standard finite difference methods in different examples. We…
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…
The state price density of a basket, even under uncorrelated Black-Scholes dynamics, does not allow for a closed from density. (This may be rephrased as statement on the sum of lognormals and is especially annoying for such are used most…
The pricing and hedging of a general class of options (including American, Bermudan and European options) on multiple assets are studied in the context of currency markets where trading is subject to proportional transaction costs, and…
We present the method of moments approach to pricing barrier-type options when the underlying is modelled by a general class of jump diffusions. By general principles the option prices are linked to certain infinite dimensional linear…
In this paper, we consider pricing of European options and spread options for Hawkes-based model for the limit order book. We introduce multivariate Hawkes process and the multivariable general compound Hawkes process. Exponential…
We consider the problem of option hedging in a market with proportional transaction costs. Since super-replication is very costly in such markets, we replace perfect hedging with an expected loss constraint. Asymptotic analysis for small…
In this paper, we introduce two novel methods to solve the American-style option pricing problem and its dual form at the same time using neural networks. Without applying nested Monte Carlo, the first method uses a series of neural…
Employing probabilistic techniques we compute best possible upper and lower bounds on the price of an option on one or two assets with continuous piecewise linear payoff function based on prices of simple call options of possibly distinct…
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…
We consider the problem of computing upper and lower bounds on the price of a European basket call option, given prices on other similar baskets. Although this problem is very hard to solve exactly in the general case, we show that in some…
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…