Related papers: Pricing complexity options
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 fully classify automatic sequences $a$ over a finite alphabet $\Omega$ with the property that each word over $\Omega$ appears is $a$ along an arithmetic progression. Using the terminology introduced by Avgustinovich, Fon-Der-Flaass and…
Consider a discrete finite-dimensional, Markovian market model. In this setting, discretely sampled American options can be priced using the so-called ``non-recombining'' tree algorithm. By successively increasing the number of exercise…
In this paper, we demonstrate that policy iteration, introduced in the context of HJB equations in [Forsyth & Labahn, 2007], is an extremely simple generic algorithm for solving linear complementarity problems resulting from the finite…
The problem of determining the European-style option price in the incomplete market has been examined within the framework of stochastic optimization. An analytic method based on the discrete dynamic programming equation (Bellman equation)…
For a given level of accuracy in option prices, the paper considers the problem of deciding when exactly, as one or more of the pricing parameters change, a barrier option degenerates into a simpler type of option. This problem is…
In studying the complexity of iterative processes it is usually assumed that the arithmetic operations of addition, multiplication, and division can be performed in certain constant times. This assumption is invalid if the precision…
In this article, we study the rate of convergence of prices when a model is approximated by some simplified model. We also provide a method how explicit error formula for more general options can be obtained if such formula is available for…
In this paper we study a notion of topological complexity for the motion planning problem. The topological complexity is a number which measures discontinuity of the process of motion planning in the configuration space X. More precisely,…
We consider as given a discrete time financial market with a risky asset and options written on that asset and determine both the sub- and super-hedging prices of an American option in the model independent framework of ArXiv:1305.6008. We…
We study an American option pricing problem with liquidity risks and transaction fees. As endogenous transaction costs, liquidity risks of the underlying asset are modeled by a mean-reverting process. Transaction fees are exogenous…
We consider different levels of complexity which are observed in the empirical investigation of financial time series. We discuss recent empirical and theoretical work showing that statistical properties of financial time series are rather…
In this paper we study the complexity of the motion planning problem for control-affine systems. Such complexities are already defined and rather well-understood in the particular case of nonholonomic (or sub-Riemannian) systems. Our aim is…
This paper classifies the complexity of various teaching models by their position in the arithmetical hierarchy. In particular, we determine the arithmetical complexity of the index sets of the following classes: (1) the class of uniformly…
A permutation of the elements of a graph is a {\it construction sequence} if no edge is listed before either of its endpoints. The complexity of such a sequence is investigated by finding the delay in placing the edges, an {\it opportunity…
We establish a relationship between the word complexity and the number of generalized diagonals for a polygonal billiard. We conclude that in the rational case the complexity function has cubic upper and lower bounds. In the tiling case the…
We give an analytical characterization of the price function of an American option in Heston-type models. Our approach is based on variational inequalities and extends recent results of Daskalopoulos and Feehan (2011). We study the…
The aim of this study was to develop methods for evaluating the American-style option prices when the volatility of the underlying asset is described by a stochastic process. As part of this problem were developed techniques for modeling…
We consider the robust pricing and hedging of American options in a continuous time setting. We assume asset prices are continuous semimartingales, but we allow for general model uncertainty specification via adapted closed convex…
We present a novel method for the numerical pricing of American options based on Monte Carlo simulation and the optimization of exercise strategies. Previous solutions to this problem either explicitly or implicitly determine so-called…