Related papers: Pricing barrier options with discrete dividends
There exist several methods how more general options can be priced with call prices. In this article, we extend these results to cover a wider class of options and market models. In particular, we introduce a new pricing formula which can…
The paper develops general, discrete, non-probabilistic market models and minmax price bounds leading to price intervals for European options. The approach provides the trajectory based analogue of martingale-like properties as well as a…
We investigate pricing-hedging duality for American options in discrete time financial models where some assets are traded dynamically and others, e.g. a family of European options, only statically. In the first part of the paper we…
Barrier options are one of the most widely traded exotic options on stock exchanges. In this paper, we develop a new stochastic simulation method for pricing barrier options and estimating the corresponding execution probabilities. We show…
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…
This paper deals with the problem of discrete-time option pricing by the mixed fractional version of Merton model with transaction costs. By a mean-self-financing delta hedging argument in a discrete-time setting, a European call option…
For a given level of accuracy in option prices, the paper considers the problem of deciding when exactly, as one or more of the pricing parameters change, a barrier option degenerates into a simpler type of option. This problem is…
In this paper we introduce a new approach to model-free path-dependent option pricing. We first introduce a general duality result for linear optimisation problems over signed measures introduced in [3] and show how the the problem of…
We show how the prices of options can be determined with the help of double-fractional differential equation in such a way that their inclusion in a portfolio of stocks provides a more reliable hedge against dramatic price drops that the…
We develop a model for indifference pricing in derivatives markets where price quotes have bid-ask spreads and finite quantities. The model quantifies the dependence of the prices and hedging portfolios on an investor's beliefs, risk…
Our goal here is to discuss the pricing problem of European and American options in discrete time using elementary calculus so as to be an easy reference for first year undergraduate students. Using the binomial model we compute the fair…
This paper is devoted to the pricing of Barrier options by optimal quadratic quantization method. From a known useful representation of the premium of barrier options one deduces an algorithm similar to one used to estimate nonlinear filter…
In this paper we introduce a deep learning method for pricing and hedging American-style options. It first computes a candidate optimal stopping policy. From there it derives a lower bound for the price. Then it calculates an upper bound, a…
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…
An efficient conditioning technique, the so-called Brownian Bridge simulation, has previously been applied to eliminate pricing bias that arises in applications of the standard discrete-time Monte Carlo method to evaluate options written on…
Two novel closed-form formulas for the price of barrier options in stochastic volatility models with zero interest rate and dividend yield but nonzero correlation between the asset and its instantaneous volatility are derived. The first is…
We continue a series of papers devoted to construction of semi-analytic solutions for barrier options. These options are written on underlying following some simple one-factor diffusion model, but all the parameters of the model as well as…
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…
In Bai and Paulsen (SIAM J. Control optim. 48, 2010) the optimal dividend problem under transaction costs was analyzed for a rather general class of diffusion processes. It was divided into several subclasses, and for the majority of…
In the standard Black-Scholes-Merton framework, dividends are represented as a continuous dividend yield and the pricing of Vanilla options on a stock is achieved through the well-known Black-Scholes formula. In reality however, stocks pay…