Related papers: Pricing American and Asian Options
We consider a portfolio with call option and the corresponding underlying asset under the standard assumption that stock-market price represents a random variable with lognormal distribution. Minimizing the variance (hedging risk) of the…
This paper develops general approaches for pricing various types of American-style Parisian options (down-in/-out, perpetual/finite-maturity) with general payoff functions based on continuous-time Markov chain (CTMC) approximation under…
This paper presents a novel approach to pricing American options using piecewise diffusion Markov processes (PDifMPs), a type of generalised stochastic hybrid system that integrates continuous dynamics with discrete jump processes. Standard…
In this article we present a new approach to the numerical valuation of derivative securities. The method is based on our previous work where we formulated the theory of pricing in terms of tradables. The basic idea is to fit a finite…
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…
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…
We propose a new, data-driven approach for efficient pricing of - fixed- and float-strike - discrete arithmetic Asian and Lookback options when the underlying process is driven by the Heston model dynamics. The method proposed in this…
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…
Due to the increasing popularity of futures trading among financial market participants, the risk management of these instruments is crucial. In this paper, we introduce a model for estimating the ideal time for leaving a trading position…
In the first part of this thesis, we focus on American options in the Heston model. We first give an analytical characterization of the value function of an American option as the unique solution of the associated (degenerate) parabolic…
The 1993 Laplace transform approach of Geman and Yor is a celebrated advance in valuing Asian options. Its insights are fundamental from both a mathematical and a financial perspective. In this paper, we discuss two observations regarding…
We consider the pricing of American put options in a model-independent setting: that is, we do not assume that asset prices behave according to a given model, but aim to draw conclusions that hold in any model. We incorporate market…
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…
The purpose of this paper is to analyze the problem of option pricing when the short rate follows subdiffusive fractional Merton model. We incorporate the stochastic nature of the short rate in our option valuation model and derive explicit…
The authors present a new simple algorithm to approximate weakly stochastic differential equations in the spirit of [1] and [2]. They apply it to the problem of pricing Asian options under the Heston stochastic volatility model, and compare…
We explain the main concepts of Prospect Theory and Cumulative Prospect Theory within the framework of rational dynamic asset pricing theory. We derive option pricing formulas when asset returns are altered with a generalized Prospect…
It is shown how to obtain accurate values for American options using Monte Carlo simulation. The main feature of the novel algorithm consists of tracking the boundary between exercise and hold regions via optimization of a certain payoff…
In this paper we propose two efficient techniques which allow one to compute the price of American basket options. In particular, we consider a basket of assets that follow a multi-dimensional Black-Scholes dynamics. The proposed…
We propose a new non parametric technique to estimate the CALL function based on the superhedging principle. Our approach does not require absence of arbitrage and easily accommodates bid/ask spreads and other market imperfections. We prove…
We propose a novel algorithm which allows to sample paths from an underlying price process in a local volatility model and to achieve a substantial variance reduction when pricing exotic options. The new algorithm relies on the construction…