Related papers: Model-independent bounds for Asian options: a dyna…
In this article, we consider a 2 factors-model for pricing defaultable bond with discrete default intensity and barrier where the 2 factors are stochastic risk free short rate process and firm value process. We assume that the default event…
We consider a method of lines (MOL) approach to determine prices of European and American exchange options when underlying asset prices are modelled with stochastic volatility and jump-diffusion dynamics. As the MOL, as with any other…
We introduce a new approach for the numerical pricing of American options. The main idea is to choose a finite number of suitable excessive functions (randomly) and to find the smallest majorant of the gain function in the span of these…
In this article we develop an explicit formula for pricing European options when the underlying stock price follows a non-linear stochastic differential delay equation (sdde). We believe that the proposed model is sufficiently flexible to…
American put options are among the most frequently traded single stock options, and their calibration is computationally challenging since no closed-form expression is available. Due to the higher flexibility in comparison to European…
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…
In this paper I develop a new computational method for pricing path dependent options. Using the path integral representation of the option price, I show that in general it is possible to perform analytically a partial averaging over the…
We provide a bound for the error committed when using a Fourier method to price European options when the underlying follows an exponential \levy dynamic. The price of the option is described by a partial integro-differential equation…
We investigate the (functional) convex order of for various continuous martingale processes, either with respect to their diffusions coefficients for L\'evy-driven SDEs or their integrands for stochastic integrals. Main results are bordered…
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)…
We provided an analytical representation of the price of a barrier option with one type of special moving barrier. We consider the case that risk free rate, dividend rate and stock volatility are time dependent. We get a pricing formula and…
We consider the framework proposed by Burgard and Kjaer (2011) that derives the PDE which governs the price of an option including bilateral counterparty risk and funding. We extend this work by relaxing the assumption of absence of…
Financial derivatives pricing aims to find the fair value of a financial contract on an underlying asset. Here we consider option pricing in the partial differential equations framework. The contemporary models lead to one-dimensional or…
We present the method of moments approach to pricing barrier-type options when the underlying is modelled by a general class of jump diffusions. By general principles the option prices are linked to certain infinite dimensional linear…
American options are financial instruments that can be exercised at any time before expiration. In this paper we study the problem of pricing this kind of derivatives within a framework in which some of the properties --volatility and…
This paper sets out to provide a general framework for the pricing of average-type options via lower and upper bounds. This class of options includes Asian, basket and options on the volume-weighted average price. We demonstrate that in…
This study addresses the interpretable estimation of price bounds in the context of price optimization. In recent years, price-optimization methods have become indispensable for maximizing revenue and profits. However, effective application…
In this paper, we propose an iterative splitting method to solve the partial differential equations in option pricing problems. We focus on the Heston stochastic volatility model and the derived two-dimensional partial differential equation…
The vast majority of works on option pricing operate on the assumption of risk neutral valuation, and consequently focus on the expected value of option returns, and do not consider risk parameters, such as variance. We show that it is…
In this paper we present a MATLAB version of a non-standard finite difference scheme for the numerical solution of the perpetual American put option models of financial markets. These models can be derived from the celebrated Black-Scholes…