Related papers: Asian option as a fixed-point
This paper gives an arbitrage-free prediction for future prices of an arbitrary co-terminal set of options with a given maturity, based on the observed time series of these option prices. The statistical analysis of such a multi-dimensional…
This paper presents the solution to a European option pricing problem by considering a regime-switching jump diffusion model of the underlying financial asset price dynamics. The regimes are assumed to be the results of an observed pure…
Opportunities for stochastic arbitrage in an options market arise when it is possible to construct a portfolio of options which provides a positive option premium and which, when combined with a direct investment in the underlying asset,…
Averaging problems are ubiquitous in Finance with the valuation of the so-called Asian options on arithmetic averages as their most conspicuous form. There is an abundance of numerical work on them, and their stochastic structure has been…
We derive behavioral finance option pricing formulas consistent with the rational dynamic asset pricing theory. In the existing behavioral finance option pricing formulas, the price process of the representative agent is not a…
In this paper, we derive and analyze a continuous of a binary option market with exogenous information. The resulting non-linear system has a discontinuous right hand side, which can be analyzed using zero-dimensional Filippov surfaces.…
The aim of this article is to provide a systematic analysis of the conditions such that Fourier transform valuation formulas are valid in a general framework; i.e. when the option has an arbitrary payoff function and depends on the path of…
Non-equilibrium phenomena occur not only in physical world, but also in finance. In this work, stochastic relaxational dynamics (together with path integrals) is applied to option pricing theory. A recently proposed model (by Ilinski et…
We study hedging and pricing of unattainable contingent claims in a non-Markovian regime-switching financial model. Our financial market consists of a bank account and a risky asset whose dynamics are driven by a Brownian motion and a…
Consider a trade market with one seller and multiple buyers. The seller aims to sell an indivisible item and maximize their revenue. This paper focuses on a simple and popular mechanism--the fixed-price mechanism. Unlike the standard…
Motivated by uncertain parameters encountered in Markov decision processes (MDPs), we study the effect of parameter uncertainty on Bellman operator-based methods. Specifically, we consider a family of MDPs where the cost parameters are from…
Cai, Song and Kou (2015) [Cai, N., Y. Song, S. Kou (2015) A general framework for pricing Asian options under Markov processes. Oper. Res. 63(3): 540-554] made a breakthrough by proposing a general framework for pricing both discretely and…
A common assumption in financial engineering is that the market price for any derivative coincides with an objectively defined risk-neutral price - a plausible assumption only if traders collectively possess objective knowledge about the…
This article addresses the problem of approximating the price of options on discrete and continuous arithmetic average of the underlying, i.e. discretely and continuously monitored Asian options, in local volatility models. A…
We synthesize and discuss some new developments in econophysics. In doing so, we focus on option pricing. We relax the assumptions of constant volatility and interest rate. In doing so, we rely on the square root of the Brownian motion. We…
We develop two alternate approaches to arbitrage-free, market-complete, option pricing. The first approach requires no riskless asset. We develop the general framework for this approach and illustrate it with two specific examples. The…
We present a model for price dynamics in the Automated Market Makers (AMM) setting. Within this framework, we propose a reference market price following a geometric Brownian motion. The AMM price is constrained by upper and lower bounds,…
In this paper we analytically study the problem of pricing an arithmetically averaged Asian option in the path integral formalism. By a trick about the Dirac delta function, the measure of the path integral is defined by an effective action…
The quanto option is a cross-currency derivative in which the pay-off is given in foreign currency and then converted to domestic currency, through a constant exchange rate, used for the conversion and determined at contract inception.…
This paper is motivated by questions about averages of stochastic processes which originate in mathematical finance, originally in connection with valuing the so-called Asian options. Starting with research of Yor's in 1992, these questions…