Related papers: Conditional Asian Options
We present an arbitrage free theoretical framework for modeling bid and ask prices of dividend paying securities in a discrete time setup using theory of dynamic acceptability indices. In the first part of the paper we develop the theory of…
We describe general multilevel Monte Carlo methods that estimate the price of an Asian option monitored at $m$ fixed dates. Our approach yields unbiased estimators with standard deviation $O(\epsilon)$ in $O(m + (1/\epsilon)^{2})$ expected…
Several procedures have been recently proposed to test the simplifying assumption for conditional copulas. Instead of considering pointwise conditioning events, we study the constancy of the conditional dependence structure when some…
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 prove the existence and pointwise lower and upper bounds for the fundamental solution of the degenerate second order partial differential equation related to Geman-Yor stochastic processes, that arise in models for option pricing theory…
In the paper, the pricing of Quanto options is studied, where the underlying foreign asset and the exchange rate are correlated with each other. Firstly, we adopt Bayesian methods to estimate unknown parameters entering the pricing formula…
The valuation process that economic agents undergo for investments with uncertain payoff typically depends on their statistical views on possible future outcomes, their attitudes toward risk, and, of course, the payoff structure itself.…
The Consumer Financial Protection Bureau defines the notion of payoff amount as the amount that has to be payed at a particular time in order to completely pay off the debt, in case the lender intends to pay off the loan early, way before…
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…
The paper studies sub and super-replication price bounds for contingent claims defined on general trajectory based market models. No prior probabilistic or topological assumptions are placed on the trajectory space, trading is assumed to…
In this paper a simple, effective adaptation of Alternating Direction Implicit (ADI) time discretization schemes is proposed for the numerical pricing of American-style options under the Heston model via a partial differential…
In the paper we consider the problem of valuation of American options written on dividend-paying assets whose price dynamics follow the classical multidimensional Black and Scholes model. We provide a general early exercise premium…
We present a method of hedging Conditional Value at Risk of a position in stock using put options. The result leads to a linear programming problem that can be solved to optimise risk hedging.
Hamiltonian approach in quantum mechanics provides a new thinking for barrier option pricing. For proportional floating barrier step options, the option price changing process is similar to the one dimensional trapezoid potential barrier…
In this paper we propose and analyse a method for estimating three quantities related to an Asian option: the fair price, the cumulative distribution function, and the probability density. The method involves preintegration with respect to…
Most decision theories, including expected utility theory, rank dependent utility theory and cumulative prospect theory, assume that investors are only interested in the distribution of returns and not in the states of the economy in which…
This article considers the pricing and hedging of a call option when liquidity matters, that is, either for a large nominal or for an illiquid underlying asset. In practice, as opposed to the classical assumptions of a price-taking agent in…
The robust option pricing problem is to find upper and lower bounds on fair prices of financial claims using only the most minimal assumptions. It contrasts with the classical, model-based approach and gained prominence in the wake of the…
Conditional risk minimization arises in high-stakes decisions where risk must be assessed in light of side information, such as stressed economic conditions, specific customer profiles, or other contextual covariates. Constructing reliable…
We study the upper hedging price for contingent claims in market models with strong types of arbitrage: increasing profit, strong arbitrage, and arbitrage of the first kind. The existence of arbitrage may make the price smaller than if it…