Related papers: Pricing complexity options
For a finite word $w$ we define and study the Kolmogorov structure function $h_w$ for nondeterministic automatic complexity. We prove upper bounds on $h_w$ that appear to be quite sharp, based on numerical evidence.
We develop a static complexity analysis for a higher-order functional language with structural list recursion. The complexity of an expression is a pair consisting of a cost and a potential. The former is defined to be the size of the…
We present a path integral method to derive closed-form solutions for option prices in a stochastic volatility model. The method is explained in detail for the pricing of a plain vanilla option. The flexibility of our approach is…
This paper proposes a model of decision-making under uncertainty in which an agent is constrained in her cognitive ability to consider complex acts. We identify the complexity of an act according to the corresponding partition of state…
We present an approach for pricing European call options in presence of proportional transaction costs, when the stock price follows a general exponential L\'{e}vy process. The model is a generalization of the celebrated work of Davis,…
We develop a theory of complexity for numerical computations that takes into account the condition of the input data and allows for roundoff in the computations. We follow the lines of the theory developed by Blum, Shub, and Smale for…
This paper is concerned with the solution of the optimal stopping problem associated to the valuation of Perpetual American options driven by continuous time Markov chains. We introduce a new dynamic approach for the numerical pricing of…
In this paper we introduce a deep learning method for pricing and hedging American-style options. It first computes a candidate optimal stopping policy. From there it derives a lower bound for the price. Then it calculates an upper bound, a…
In this paper, we introduce two novel methods to solve the American-style option pricing problem and its dual form at the same time using neural networks. Without applying nested Monte Carlo, the first method uses a series of neural…
We initiate the theory of communication complexity of individual inputs held by the agents, rather than worst-case or average-case. We consider total, partial, and partially correct protocols, one-way versus two-way, with and without help…
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…
Perpetual American options are financial instruments that can be readily exercised and do not mature. In this paper we study in detail the problem of pricing this kind of derivatives, for the most popular flavour, within a framework in…
In this paper we consider a scenario where there are several algorithms for solving a given problem. Each algorithm is associated with a probability of success and a cost, and there is also a penalty for failing to solve the problem. The…
Duality for robust hedging with proportional transaction costs of path dependent European options is obtained in a discrete time financial market with one risky asset. Investor's portfolio consists of a dynamically traded stock and a static…
The notion of Kolmogorov complexity (=the minimal length of a program that generates some object) is often useful as a kind of language that allows us to reformulate some notions and therefore provide new intuition. In this survey we…
We develop a theory for option pricing with perfect hedging in an inefficient market model where the underlying price variations are autocorrelated over a time tau. This is accomplished by assuming that the underlying noise in the system is…
We study the Option pricing with linear investment strategy based on discrete time trading of the underlying security, which unlike the existing continuous trading models provides a feasible real market implementation. Closed form formulas…
Our goal here is to discuss the pricing problem of European and American options in discrete time using elementary calculus so as to be an easy reference for first year undergraduate students. Using the binomial model we compute the fair…
We investigate pricing-hedging duality for American options in discrete time financial models where some assets are traded dynamically and others, e.g. a family of European options, only statically. In the first part of the paper we…
We extend the viscosity solution characterization proved in [5] for call/put American option prices to the case of a general payoff function in a multi-dimensional setting: the price satisfies a semilinear re-action/diffusion type equation.…