Related papers: High-order ADI scheme for option pricing in stocha…
This paper proposes a hybrid credit risk model, in closed form, to price vulnerable options with stochastic volatility. The distinctive features of the model are threefold. First, both the underlying and the option issuer's assets follow…
This paper presents a new model for options pricing. The Black-Scholes-Merton (BSM) model plays an important role in financial options pricing. However, the BSM model assumes that the risk-free interest rate, volatility, and equity premium…
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…
In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the…
In this paper, a higher-order time-discretization scheme is proposed, where the iterates approximate the solution of the stochastic semilinear wave equation driven by multiplicative noise with general drift and diffusion. We employ a…
In the present work, the European option pricing SWIFT method is extended for Heston model calibration. The computation of the option price gradient is simplified thanks to the knowledge of the characteristic function in closed form. The…
We propose a fast and accurate numerical method for pricing European swaptions in multi-factor Gaussian term structure models. Our method can be used to accelerate the calibration of such models to the volatility surface. The pricing of an…
We consider high-order splitting schemes for large-scale differential Riccati equations. Such equations arise in many different areas and are especially important within the field of optimal control. In the large-scale case, it is critical…
In this paper the valuation problem of a European call option in presence of both stochastic volatility and transaction costs is considered. In the limit of small transaction costs and fast mean reversion, an asymptotic expression for the…
In this paper new analytical and numerical approaches to valuating path-dependent options of European type have been developed. The model of stochastic volatility as a basic model has been chosen. For European options we could improve the…
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 study the Heston model for pricing European options on stocks with stochastic volatility. This is a Black\--Scholes\--type equation whose spatial domain for the logarithmic stock price $x\in \RR$ and the variance $v\in (0,\infty)$ is the…
Exact simulation schemes under the Heston stochastic volatility model (e.g., Broadie-Kaya and Glasserman-Kim) suffer from computationally expensive modified Bessel function evaluations. We propose a new exact simulation scheme without the…
We present a new limiter method for solving the advection equation using a high-order, finite-volume discretization. The limiter is based on the flux-corrected transport algorithm. We modify the classical algorithm by introducing a new…
Inverse design of complex flows is notoriously challenging because of the high cost of high dimensional optimization. Usually, optimization problems are either restricted to few control parameters, or adjoint-based approaches are used to…
Long maturity options or a wide class of hybrid products are evaluated using a local volatility type modelling for the asset price S(t) with a stochastic interest rate r(t). The calibration of the local volatility function is usually…
The Heston stochastic volatility process, which is widely used as an asset price model in mathematical finance, is a paradigm for a degenerate diffusion process where the degeneracy in the diffusion coefficient is proportional to the square…
In this article we propose a novel approach to reduce the computational complexity of various approximation methods for pricing discrete time American options. Given a sequence of continuation values estimates corresponding to different…
We consider a system of coupled free boundary problems for pricing American put options with regime-switching. To solve this system, we first employ the logarithmic transformation to map the free boundary for each regime to multi-fixed…
This paper presents the design and analysis of a Hybrid High-Order (HHO) approximation for a distributed optimal control problem governed by the Poisson equation. We propose three distinct schemes to address unconstrained control problems…