Related papers: A Note on the Pricing of Basket Options Using Tayl…
In this paper, we study a game with positive or plus infinite expectation and determine the optimal proportion of investment for maximizing the limit expectation of growth rate per attempt. With this objective, we introduce a new pricing…
We show that shortfall risks of American options in a sequence of multinomial approximations of the multidimensional Black--Scholes (BS) market converge to the corresponding quantities for similar American options in the multidimensional BS…
This paper focuses on the pricing of continuous geometric Asian options (GAOs) under a multifactor stochastic volatility model. The model considers fast and slow mean reverting factors of volatility, where slow volatility factor is…
This article presents fast lower and upper estimates for a large class of options: the class of constrained multiple exercise American options. Typical options in this class are swing options with volume and timing constraints, and passport…
In this article, we present an approach which allows to take into account the effect of extreme values in the modeling of financial asset returns and in the valorisation of associeted options. Specifically, the marginal distribution of…
The Black-Scholes formula for pricing options on stocks and other securities has been generalized by Merton and Garman to the case when stock volatility is stochastic. The derivation of the price of a security derivative with stochastic…
In this paper, we price American-style Parisian down-and-in call options under the Black-Scholes framework. Usually, pricing an American-style option is much more difficult than pricing its European-style counterpart because of the…
We consider approximate pricing formulas for European options based on approximating the logarithmic return's density of the underlying by a linear combination of rescaled Hermite polynomials. The resulting models, that can be seen as…
We apply Gauge Theory of Arbitrage (GTA) {hep-th/9710148} to derivative pricing. We show how the standard results of Black-Scholes analysis appear from GTA and derive correction to the Black-Scholes equation due to a virtual arbitrage and…
An option market maker incurs funding costs when carrying and hedging inventory. To hedge a net long delta inventory, for example, she pays a fee to borrow stock from the securities lending market. Because of haircuts, she posts additional…
In this paper we focus on the subdiffusive Black Scholes model. The main part of our work consists of the finite difference method as a numerical approach to the option pricing in the considered model. We derive the governing fractional…
In this paper, we introduce a special kind of finite volume method called Multi-Point Flux Approximation method (MPFA) to price European and American options in two dimensional domain. We focus on the L-MPFA method for space discretization…
In the paper, the pricing of Quanto options is studied, where the underlying foreign asset and the exchange rate are correlated with each other. Firstly, we adopt Bayesian methods to estimate unknown parameters entering the pricing formula…
We develop a novel deep learning approach for pricing European basket options written on assets that follow jump-diffusion dynamics. The option pricing problem is formulated as a partial integro-differential equation, which is approximated…
In this paper, we study the asymptotic behavior of Asian option prices in the worst case scenario under an uncertain volatility model. We give a procedure to approximate the Asian option prices with a small volatility interval. By imposing…
In this paper, we present an implicit finite difference method for the numerical solution of the Black-Scholes model of American put options without dividend payments. We combine the proposed numerical method by using a front fixing…
We study the numerical evaluation of several functions appearing in the small time expansion of the distribution of the time-integral of the geometric Brownian motion as well as its joint distribution with the terminal value of the…
We derive a closed-form solution for the price of an average price as well as an average strike geometric Asian option, by making use of the path integral formulation. Our results are compared to a numerical Monte Carlo simulation. We also…
In this article we develop an explicit formula for pricing European options when the underlying stock price follows a non-linear stochastic differential delay equation (sdde). We believe that the proposed model is sufficiently flexible to…
In the present paper, a decomposition formula for the call price due to Al\`{o}s is transformed into a Taylor type formula containing an infinite series with stochastic terms. The new decomposition may be considered as an alternative to the…