Related papers: Numerical stability of a hybrid method for pricing…

This paper examines the problem of pricing spread options under some models with jumps driven by Compound Poisson Processes and stochastic volatilities in the form of Cox-Ingersoll-Ross(CIR) processes. We derive the characteristic function…

We present a differential machine learning method for zero-days-to-expiry (0DTE) options under a stochastic-volatility jump-diffusion model. To handle the ultra-short-maturity regime, we express the option price in Black-Scholes form with a…

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…

We propose a machine learning-based extension of the classical binomial option pricing model that incorporates key market microstructure effects. Traditional models assume frictionless markets, overlooking empirical features such as bid-ask…

We study the pricing of derivative securities in financial markets modeled by a sub-mixed fractional Brownian motion with jumps (smfBm-J), a non-Markovian process that captures both long-range dependence and jump discontinuities. Under this…

Dynamic jumps in the price and volatility of an asset are modelled using a joint Hawkes process in conjunction with a bivariate jump diffusion. A state space representation is used to link observed returns, plus nonparametric measures of…

In a stochastic volatility framework, we find a general pricing equation for the class of payoffs depending on the terminal value of a market asset and its final quadratic variation. This allows a pricing tool for European-style claims…

We investigate methods for pricing American options under the variance gamma model. The variance gamma process is a pure jump process which is constructed by replacing the calendar time by the gamma time in a Brownian motion with drift,…

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 introduce a linear stochastic volatility model driven by $\alpha$-stable processes, which admits a unique positive solution. To preserve positivity, we modify the classical forward Euler-Maruyama scheme and analyze its…

Parametric estimation of stochastic differential equations (SDEs) has been a subject of intense studies already for several decades. The Heston model for instance is driven by two coupled SDEs and is often used in financial mathematics for…

This paper extends the valuation and optimal surrender framework for variable annuities with guaranteed minimum benefits in a L\'evy equity market environment by incorporating a stochastic interest rate described by the Hull-White model.…

We present a detailed analysis and implementation of a splitting strategy to identify simultaneously the local-volatility surface and the jump-size distribution from quoted European prices. The underlying model consists of a jump-diffusion…

This paper presents hedging strategies for European and exotic options in a Levy market. By applying Taylor's Theorem, dynamic hedging portfolios are con- structed under different market assumptions, such as the existence of power jump…

We introduce a modular framework that extends the signature method to handle American option pricing under evolving volatility roughness. Building on the signature-pricing framework of Bayer et al. (2025), we add three practical…

We present a new approximation scheme for the price and exercise policy of American options. The scheme is based on Hermite polynomial expansions of the transition density of the underlying asset dynamics and the early exercise premium…

We evaluate the hedging performance of a high-order compact finite difference scheme from [4] for option pricing in Bates model. We compare the scheme's hedging performance to standard finite difference methods in different examples. We…

Recently, an Almost-Exact Simulation (AES) scheme was introduced for the Heston stochastic volatility model and tested for European option pricing. This paper extends this scheme for pricing Bermudan and American options under both Heston…

We consider rate swaps which pay a fixed rate against a floating rate in presence of bid-ask spread costs. Even for simple models of bid-ask spread costs, there is no explicit strategy optimizing an expected function of the hedging error.…

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…