Related papers: On the value of being American
In this paper we examine the problem of valuing an exotic derivative known as the American passport option where the underlying is driven by a L\'evy process. The passport option is a call option on a trading account. We derive the pricing…
We study the regularity of the stochastic representation of the solution of a class of initial-boundary value problems related to a regime-switching diffusion. This representation is related to the value function of a finite-horizon optimal…
American options are the reference instruments for the model calibration of a large and important class of single stocks. For this task, a fast and accurate pricing algorithm is indispensable. The literature mainly discusses pricing methods…
We consider the problem of finding a consistent upper price bound for exotic options whose payoff depends on the stock price at two different predetermined time points (e.g. Asian option), given a finite number of observed call prices for…
We consider the problem of valuation of American options written on dividend-paying assets whose price dynamics follows a multidimensional exponential Levy model. We carefully examine the relation between the option prices, related partial…
This paper examines the valuation of American capped call options with two-level caps. The structure of the immediate exercise region is significantly more complex than in the classical case with constant cap. When the cap grows over time,…
Developments in finance industry and academic research has led to innovative financial products. This paper presents an alternative approach to price American options. Our approach utilizes famous \cite{heath1992bond} ("HJM") technique to…
In this paper we investigate a nonlinear generalization of the Black-Scholes equation for pricing American style call options in which the volatility term may depend on the underlying asset price and the Gamma of the option. We propose a…
The aim of this study was to develop methods for evaluating the American-style option prices when the volatility of the underlying asset is described by a stochastic process. As part of this problem were developed techniques for modeling…
In this paper we study pricing of American put options on the Black and Scholes market with a stochastic interest rate and finite-time maturity. We prove that the option value is a $C^1$ function of the initial time, interest rate and stock…
We study the problem of option pricing and hedging strategies within the frame-work of risk-return arguments. An economic agent is described by a utility function that depends on profit (an expected value) and risk (a variance). In the…
We consider the problem of pricing American Exchange options driven by a L\'evy process. We study the properties of American Exchange options, we represented it as the sum of the price of the corresponding European exchange option price and…
We consider a financial market where stocks are available for dynamic trading, and European and American options are available for static trading (semi-static trading strategies). We assume that the American options are infinitely…
In this paper, we introduce two novel methods to solve the American-style option pricing problem and its dual form at the same time using neural networks. Without applying nested Monte Carlo, the first method uses a series of neural…
In the context of a Black-Scholes economy and with a no-arbitrage argument, we derive arbitrarily accurate lower and upper bounds for the value of European options on a stock paying a discrete dividend. Setting the option price error below…
We consider an American contingent claim on a financial market where the buyer has additional information. Both agents (seller and buyer) observe the same prices, while the information available to them may differ due to some extra…
Real life hedging in the Black-Scholes model must be imperfect and if the stock's drift is higher than the risk free rate, leads to a profit on average. Hence the option price is examined as a fair game agreement between the parties, based…
This paper considers utility indifference valuation of derivatives under model uncertainty and trading constraints, where the utility is formulated as an additive stochastic differential utility of both intertemporal consumption and…
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…
A version of indifference valuation of a European call option is proposed that includes statistical regularities of nonstochastic randomness. Classical relations (forward contract value and Black-Scholes formula) are obtained as particular…