Related papers: On Trading American Put Options with Interactive V…
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…
This paper is concerned with an optimal stock selling rule under a Markov chain model. The objective is to find an optimal stopping time to sell the stock so as to maximize an expected return. Solutions to the associated variational…
The latest generation of volatility derivatives goes beyond variance and volatility swaps and probes our ability to price realized variance and sojourn times along bridges for the underlying stock price process. In this paper, we give an…
In this note, we develop stock option price approximations for a model which takes both the risk o default and the stochastic volatility into account. We also let the intensity of defaults be influenced by the volatility. We show that it…
We study the behavior of the critical price of an American put option near maturity in the Jump diffusion model when the underlying stock pays dividends at a continuous rate and the limit of the critical price is smaller than the stock…
We study optimal liquidation in the presence of linear temporary and transient price impact along with taking into account a general price predicting finite-variation signal. We formulate this problem as minimization of a cost-risk…
It is known that the implied volatility skew of FX options demonstrates a stochastic behavior which is called stochastic skew. In this paper we create stochastic skew by assuming the spot/instantaneous variance correlation to be stochastic.…
In this article, we tackle the problem of a market maker in charge of a book of options on a single liquid underlying asset. By using an approximation of the portfolio in terms of its vega, we show that the seemingly high-dimensional…
We consider an investor facing a classical portfolio problem of optimal investment in a log-Brownian stock and a fixed-interest bond, but constrained to choose portfolio and consumption strategies that reduce a dynamic shortfall risk…
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…
Paper is based on "The cost of illiquidity and its effects on hedging", L. C. G. Rogers and Surbjeet Singh, 2010. We generalize its thesis to constant elasticity model, which own previously used Black-Schoels model as a special case. The…
We present a solution to an optimal stopping problem for a process with a wide-class of novel dynamics. The dynamics model the support/resistance line concept from financial technical analysis.
We consider the super-hedging price of an American option in a discrete-time market in which stocks are available for dynamic trading and European options are available for static trading. We show that the super-hedging price $\pi$ is given…
Based on the existing literature, this article presents the different ways of choosing the parameters of stochastic volatility models in general, in the context of pricing financial derivative contracts. This includes the use of stochastic…
In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the…
We study optimal liquidation strategies under partial information for a single asset within a finite time horizon. We propose a model tailored for high-frequency trading, capturing price formation driven solely by order flow through…
In this paper, we present a method of estimating the volatility of a signal that displays stochastic noise (such as a risky asset traded on an open market) utilizing Linear Predictive Coding. The main purpose is to associate volatility with…
In this study, we propose a varying terminal time structure for the optimal control problem under state constraints, in which the terminal time follows the varying of the control via the constrained condition. Focusing on this new optimal…
In this paper we provide a theoretical analysis of Variable Annuities with a focus on the holder's right to an early termination of the contract. We obtain a rigorous pricing formula and the optimal exercise boundary for the surrender…
We present a stochastic local volatility model for derivative contracts on commodity futures. The aim of the model is to be able to recover the prices of derivative claims both on futures contracts and on indices on futures strategies.…