Related papers: Effective and simple VWAP option pricing model
We revisit the problem of pricing options with historical volatility estimators. We do this in the context of a generalized GARCH model with multiple time scales and asymmetry. It is argued that the reason for the observed volatility risk…
The research presented in this article provides an alternative option pricing approach for a class of rough fractional stochastic volatility models. These models are increasingly popular between academics and practitioners due to their…
In this work we present an analytical model, based on the path-integral formalism of Statistical Mechanics, for pricing options using first-passage time problems involving both fixed and deterministically moving absorbing barriers under…
In this paper we introduce a simple continuous-time asset pricing framework, based on general multi-dimensional diffusion processes, that combines semi-analytic pricing with a nonlinear specification for the market price of risk. Our…
Geometric Asian options are a type of options where the payoff depends on the geometric mean of the underlying asset over a certain period of time. This paper is concerned with the pricing of such options for the class of Volterra-Heston…
In this paper, we introduce an efficient and end-to-end quantum algorithm tailored for computing the Value-at-Risk (VaR) and conditional Value-at-Risk (CVar) for a portfolio of European options. Our focus is on leveraging quantum…
The problem of European-style option pricing in time-changed L\'{e}vy models in the presence of compound Poisson jumps is considered. These jumps relate to sudden large drops in stock prices induced by political or economical hits. As the…
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.…
For complex latent variable models, the likelihood function is not available in closed form. In this context, a popular method to perform parameter estimation is Importance Weighted Variational Inference. It essentially maximizes the…
This paper presents closed-form analytical formulas for pricing volatility and variance derivatives with nonlinear payoffs under discrete-time observations. The analysis is based on a probabilistic approach assuming that the underlying…
This article addresses the problem of approximating the price of options on discrete and continuous arithmetic average of the underlying, i.e. discretely and continuously monitored Asian options, in local volatility models. A…
Equity options are known to be notoriously difficult to price accurately, and even with the development of established mathematical models there are many assumptions that must be made about the underlying processes driving market movements.…
This paper derives a new semi closed-form approximation formula for pricing an up-and-out barrier option under a certain type of stochastic volatility model including SABR model by applying a rigorous asymptotic expansion method developed…
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…
Options are financial instruments that depend on the underlying stock. We explain their non-Gaussian fluctuations using the nonextensive thermodynamics parameter $q$. A generalized form of the Black-Scholes (B-S) partial differential…
Families of exact solutions are found to a nonlinear modification of the Black-Scholes equation. This risk-adjusted pricing methodology model (RAPM) incorporates both transaction costs and the risk from a volatile portfolio. Using the Lie…
In this paper we analyze a nonlinear Black--Scholes model for option pricing under variable transaction costs. The diffusion coefficient of the nonlinear parabolic equation for the price $V$ is assumed to be a function of the underlying…
This paper addresses the challenges of pricing exotic options and structured products, which traditional models often fail to handle due to their inability to capture real-world market phenomena like fat-tailed distributions and volatility…
Based on empirical market data, a stochastic volatility model is proposed with volatility driven by fractional noise. The model is used to obtain a risk-neutrality option pricing formula and an option pricing equation.
In this paper we study an optimal portfolio selection problem under instantaneous price impact. Based on some empirical analysis in the literature, we model such impact as a concave function of the trading size when the trading size is…