Related papers: Pricing and Hedging Long-Term Options

We study the upper and lower bounds for prices of European and American style options with the possibility of an external termination, meaning that the contract may be terminated at some random time. Under the assumption that the underlying…

We study scaled trinomial models converging to the Black--Scholes model, and analyze exponential certainty-equivalent prices for path-dependent European options. As the number of trading dates $n$ tends to infinity and the risk aversion is…

We study the problem of option pricing and hedging strategies within the frame-work of risk-return arguments. An economic agent is described by a utility function that depends on profit (an expected value) and risk (a variance). In the…

We give an exposition and numerical studies of upper hedging prices in multinomial models from the viewpoint of linear programming and the game-theoretic probability of Shafer and Vovk. We also show that, as the number of rounds goes to…

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…

In this paper we study the pricing of exchange options when underlying assets have stochastic volatility and stochastic correlation. An approximation using a closed-form approximation based on a Taylor expansion of the conditional price is…

This paper constructs and studies the long-term factorization of affine pricing kernels into discounting at the rate of return on the long bond and the martingale component that accomplishes the change of probability measure to the long…

In this paper, we give a numerical method for pricing long maturity, path dependent options by using the Markov property for each underlying asset. This enables us to approximate a path dependent option by using some kinds of plain…

The computation of Greeks for exponential L\'evy models are usually approached by Malliavin Calculus and other methods, as the Likelihood Ratio and the finite difference method. In this paper we obtain exact formulas for Greeks of European…

We present a perturbation theory of the market impact based on an extension of the framework proposed by [Loeper, 2018] -- originally based on [Liu and Yong, 2005] -- in which we consider only local linear market impact. We study the…

We investigate model risk and distributionally robust optimization (DRO) under marginal and martingale constraints. Building on our previous work, we address the previously open case of static hedging with second-period maturity vanilla…

We consider the discretized Bachelier model where hedging is done on an equidistant set of times. Exponential utility indifference prices are studied for path-dependent European options and we compute their non-trivial scaling limit for a…

This study derives the expected liquidity cost when performing the delta hedging process of a European option. This cost is represented by an integration formula that includes European option prices and a certain function depending on the…

Using spectral decomposition techniques and singular perturbation theory, we develop a systematic method to approximate the prices of a variety of options in a fast mean-reverting stochastic volatility setting. Four examples are provided in…

We price European options in a class of models in which the volatility of the underlying risky asset depends on the short rate of interest. Our study results in an explicit pricing formula that depends on knowledge of a characteristic…

At present, there is an explosion of practical interest in the pricing of interest rate (IR) derivatives. Textbook pricing methods do not take into account the leptokurticity of the underlying IR process. In this paper, such a leptokurtic…

We study the pricing and hedging of derivative securities with uncertainty about the volatility of the underlying asset. Rather than taking all models from a prespecified class equally seriously, we penalise less plausible ones based on…

We apply rough-path theory to study the discrete-time gamma-hedging strategy. We show that if a trader knows that the market price of a set of European options will be given by a diffusive pricing model, then the discrete-time gamma-hedging…

The Black-Scholes option pricing model remains a cornerstone in financial mathematics, yet its application is often challenged by the need for accurate hedging strategies, especially in dynamic market environments. This paper presents a…

We derive new formulas for the price of the European call and put options in the Black-Scholes model, under the form of uniformly convergent series generalizing previously known approximations. We also provide precise boundaries for the…