Related papers: Pricing occupation-time options in a mixed-exponen…
This study developed a novel formulation of conditional expectations within the framework of a jump-diffusion mean-field stochastic differential equation. We introduce an integrated approach that combines unconditioned expectations with…
We present an approach for pricing European call options in presence of proportional transaction costs, when the stock price follows a general exponential L\'{e}vy process. The model is a generalization of the celebrated work of Davis,…
We derive an equation to compute directly the expected occupation time of the centered Ornstein-Uhlenbeck process. This allows us to identify the parameters of the Ornstein-Uhlenbeck process for available occupation times via a standard…
For a skip-free Markov process on non-negative integers with generator matrix Q, we evaluate the joint Laplace transform of the occupation times before hitting the state n (starting at 0). This Laplace transform has a very straightforward…
In this paper we consider the problem of calculating the quantiles of a risky position, the dynamic of which is described as a continuous time regime-switching jump-diffusion, by using Fourier Transform methods. Furthermore, we study a…
European options can be priced by solving parabolic partial(-integro) differential equations under stochastic volatility and jump-diffusion models like Heston, Merton, and Bates models. American option prices can be obtained by solving…
Following the foundational work of the Black--Scholes model, extensive research has been developed to price the option by addressing its underlying assumptions and associated pricing biases. This study introduces a novel framework for…
We study perpetual American option pricing problems in an extension of the Black-Merton-Scholes model in which the dividend and volatility rates of the underlying risky asset depend on the running values of its maximum and maximum drawdown.…
We model the joint distribution of choice probabilities and decision times in binary choice tasks as the solution to a problem of optimal sequential sampling, where the agent is uncertain of the utility of each action and pays a constant…
The classical and extended occupancy distributions are useful for examining the number of occupied bins in problems involving random allocation of balls to bins. We examine the extended occupancy problem by framing it as a Markov chain and…
In this paper, we compute the Laplace transform of occupation times (of the negative half-line) of spectrally negative L\'evy processes. Our results are extensions of known results for standard Brownian motion and jump-diffusion processes.…
This paper presents an option pricing model that incorporates clustered jumps using a bivariate Hawkes process. The process captures both self- and cross-excitation of positive and negative jumps, enabling the model to generate return…
In the setting of polynomial jump-diffusion dynamics, we provide an explicit formula for computing correlators, namely, cross-moments of the process at different time points along its path. The formula appears as a linear combination of…
In this article, we consider a Markov process X, starting from x and solving a stochastic differential equation, which is driven by a Brownian motion and an independent pure jump component exhibiting state-dependent jump intensity and…
We present a multivariate stochastic volatility model with leverage, which is flexible enough to recapture the individual dynamics as well as the interdependencies between several assets while still being highly analytically tractable.…
This paper studies subordinate Ornstein-Uhlenbeck (OU) processes, i.e., OU diffusions time changed by L\'{e}vy subordinators. We construct their sample path decomposition, show that they possess mean-reverting jumps, study their equivalent…
We derive expressions for the first three moments of the decision time (DT) distribution produced via first threshold crossings by sample paths of a drift-diffusion equation. The "pure" and "extended" diffusion processes are widely used to…
We discuss utility based pricing and hedging of jump diffusion processes with emphasis on the practical applicability of the framework. We point out two difficulties that seem to limit this applicability, namely drift dependence and…
This paper presents a new asymptotic expansion method for pricing continuously monitoring barrier options. In particular, we develops a semi-group expansion scheme for the Cauchy-Dirichlet problem in the second-order parabolic partial…
Motivated by the industry practice of pairs trading, we study the optimal timing strategies for trading a mean-reverting price spread. An optimal double stopping problem is formulated to analyze the timing to start and subsequently…