Related papers: A fast Fourier transform method for Mellin-type op…
In this article we propose a novel approach to reduce the computational complexity of various approximation methods for pricing discrete time American options. Given a sequence of continuation values estimates corresponding to different…
In this paper we develop a semi-closed form solutions for the barrier (perhaps, time-dependent) and American options written on the underlying stock which follows a time-dependent OU process with a log-normal drift. This model is equivalent…
Risk assessment and in particular derivatives pricing is one of the core areas in computational finance and accounts for a sizeable fraction of the global computing resources of the financial industry. We outline a quantum-inspired…
A statistical decision problem is hidden in the core of option pricing. A simple form for the price C of a European call option is obtained via the minimum Bayes risk, R_B, of a 2-parameter estimation problem, thus justifying calling C…
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…
We combine the one-dimensional Monte Carlo simulation and the semi-analytical one-dimensional heat potential method to design an efficient technique for pricing barrier options on assets with correlated stochastic volatility. Our approach…
We synthesize and discuss some new developments in econophysics. In doing so, we focus on option pricing. We relax the assumptions of constant volatility and interest rate. In doing so, we rely on the square root of the Brownian motion. We…
We introduce a new numerical method for the computation of the inverse nonlinear Fourier transform and compare its computational complexity and accuracy to those of other methods available in the literature. For a given accuracy, the…
Options have provided a field of much study because of the complexity involved in pricing them. The Black-Scholes equations were developed to price options but they are only valid for European styled options. There is added complexity when…
The COS method proposed in Fang and Oosterlee (2008), although highly efficient, may lack robustness for a number of cases. In this paper, we present a Stable pricing of call options based on Fourier cosine series expansion. The Stability…
This paper deals with the numerical approximation of American-style option values governed by partial differential complementarity problems. For a variety of one- and two-asset American options we investigate by ample numerical experiments…
We present a multivariate stochastic volatility model with leverage, which is flexible enough to recapture the individual dynamics as well as the interdependencies between several assets while still being highly analytically tractable.…
This paper mainly discusses the American option's hedging strategies via binomialmodel and the basic idea of pricing and hedging American option. Although the essential scheme of hedging is almost the same as European option, small…
In this paper we study the pricing of exchange options under a dynamic described by stochastic correlation with random jumps. In particular, we consider a Ornstein-Uhlenbeck covariance model with Levy Background Noise Process driven by…
We provide a nonparametric method for the computation of instantaneous multivariate volatility for continuous semi-martingales, which is based on Fourier analysis. The co-volatility is reconstructed as a stochastic function of time by…
Within a Markovian complete financial market, we consider the problem of hedging a Bermudan option with a given probability. Using stochastic target and duality arguments, we derive a backward numerical scheme for the Fenchel transform of…
Fast Fourier transform (FFT) based methods have turned out to be an effective computational approach for numerical homogenisation. In particular, Fourier-Galerkin methods are computational methods for partial differential equations that are…
We compute Greeks for stochastic volatility models driven by Brownian informations. We use the Malliavin method introduced for deterministic volatility models.
We investigate the pricing of cliquet options in a jump-diffusion model. The considered option is of monthly sum cap style while the underlying stock price model is driven by a drifted L\'{e}vy process entailing a Brownian diffusion…
We consider a system of coupled free boundary problems for pricing American put options with regime-switching. To solve this system, we first employ the logarithmic transformation to map the free boundary for each regime to multi-fixed…