Related papers: Pricing American options using martingale bases
We derive a closed-form solution for the price of an average price as well as an average strike geometric Asian option, by making use of the path integral formulation. Our results are compared to a numerical Monte Carlo simulation. We also…
In this work, we develop a novel efficient quadrature and sparse grid based polynomial interpolation method to price American options with multiple underlying assets. The approach is based on first formulating the pricing of American…
This article presents fast lower and upper estimates for a large class of options: the class of constrained multiple exercise American options. Typical options in this class are swing options with volume and timing constraints, and passport…
This research investigates pricing financial options based on the traditional martingale theory of arbitrage pricing applied to neural SDEs. We treat neural SDEs as universal It\^o process approximators. In this way we can lift all…
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 propose a methodology for computing single and multi-asset European option prices, and more generally expectations of scalar functions of (multivariate) random variables. This new approach combines the ability of Monte Carlo simulation…
Employing probabilistic techniques we compute best possible upper and lower bounds on the price of an option on one or two assets with continuous piecewise linear payoff function based on prices of simple call options of possibly distinct…
This note proposes a method for pricing high-dimensional American options based on modern methods of multidimensional interpolation. The method allows using sparse grids and thus mitigates the curse of dimensionality. A framework of the…
In this paper we propose a semi-analytic approach to pricing American options for time-dependent jump-diffusions models with exponential jumps The idea of the method is to further generalize our approach developed for pricing barrier,…
Despite significant advancements in machine learning for derivative pricing, the efficient and accurate valuation of American options remains a persistent challenge due to complex exercise boundaries, near-expiry behavior, and intricate…
In the framework of bilateral Gamma stock models we seek for adequate option pricing measures, which have an economic interpretation and allow numerical calculations of option prices. Our investigations encompass Esscher transforms, minimal…
This paper is devoted to pricing American options using Monte Carlo and the Malliavin calculus. Unlike the majority of articles related to this topic, in this work we will not use localization fonctions to reduce the variance. Our method is…
In this paper we introduce a new algorithm for American Monte Carlo that can be used either for American-style options, callable structured products or for computing counterparty credit risk (e.g. CVA or PFE computation). Leveraging least…
We introduce a new method to price American options based on Chebyshev interpolation. In each step of a dynamic programming time-stepping we approximate the value function with Chebyshev polynomials. The key advantage of this approach is…
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 this paper, we demonstrate that policy iteration, introduced in the context of HJB equations in [Forsyth & Labahn, 2007], is an extremely simple generic algorithm for solving linear complementarity problems resulting from the finite…
We present a numerical method for the frequent pricing of financial derivatives that depends on a large number of variables. The method is based on the construction of a polynomial basis to interpolate the value function of the problem by…
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…
A discretization scheme for nonnegative diffusion processes is proposed and the convergence of the corresponding sequence of approximate processes is proved using the martingale problem framework. Motivations for this scheme come typically…
This paper mainly discusses the American option's hedging strategies via binomialmodel and the basic idea of pricing and hedging American option. Although the essential scheme of hedging is almost the same as European option, small…