Related papers: Application of Malliavin calculus to exact and app…
Using Malliavin calculus techniques, we derive an analytical formula for the price of European options, for any model including local volatility and Poisson jump process. We show that the accuracy of the formula depends on the smoothness of…
In this paper, we derive the price of a European call option of an asset following a normal process assuming stochastic volatility. The volatility is assumed to follow the Cox Ingersoll Ross (CIR) process. We then use the fast Fourier…
Malliavin calculus is a powerful and general framework for the analysis of square-integrable random variables, but it often suffers from a lack of tractability and explicit representations. To address this limitation, we focus on a subclass…
Calibration to a surface of option prices requires specifying a suitably flexible martingale model for the discounted asset price under a risk-neutral measure. Assuming Brownian noise and mean-square integrability, we construct an…
Spot option prices, forwards and options on forwards relevant for the commodity markets are computed when the underlying process S is modelled as an exponential of a process {\xi} with memory as e.g. a L\'evy semi-stationary process.…
We consider the infinite dimensional Heston stochastic volatility model proposed in \arXiv:1706:03500. The price of a forward contract on a non-storable commodity is modelled by a generalized Ornstein-Uhlenbeck process in the Filipovi\'{c}…
We present an option pricing formula for European options in a stochastic volatility model. In particular, the volatility process is defined using a fractional integral of a diffusion process and both the stock price and the volatility…
We present an adaptive approach for valuing the European call option on assets with stochastic volatility. The essential feature of the method is a reduction of uncertainty in latent volatility due to a Bayesian learning procedure. Starting…
A stochastic model for pure-jump diffusion (the compound renewal process) can be used as a zero-order approximation and as a phenomenological description of tick-by-tick price fluctuations. This leads to an exact and explicit general…
In this paper we study short-time behavior of the at-the-money implied volatility for Inverse European options with fixed strike price. The asset price is assumed to follow a general stochastic volatility process. Using techniques of the…
We consider a stochastic volatility model where the price evolution depend on the exponential of the Ornstein--Uhlenbeck process. After a brief revision of the related theory the entropy-minimal equivalent martingale measure. is calculated.
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 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 the classical model of stock prices which is assumed to be Geometric Brownian motion, the drift and the volatility of the prices are held constant. However, in reality, the volatility does vary. In quantitative finance, the Heston model…
In this paper, we price European Call three different option pricing models, where the volatility is dynamically changing i.e. non constant. In stochastic volatility (SV) models for option pricing a closed form approximation technique is…
We analyze the problem of the analytical characterization of the probability distribution of financial returns in the exponential Ornstein-Uhlenbeck model with stochastic volatility. In this model the prices are driven by a Geometric…
We study the pricing of European-style options written on forward contracts within function-valued infinite-dimensional affine stochastic volatility models. The dynamics of the underlying forward price curves are modeled within the…
In this paper we provide a valuation formula for different classes of actuarial and financial contracts which depend on a general loss process, by using the Malliavin calculus. In analogy with the celebrated Black-Scholes formula, we aim at…
In a series of recent papers Barndorff-Nielsen and Shephard introduce an attractive class of continuous time stochastic volatility models for financial assets where the volatility processes are functions of positive Ornstein-Uhlenbeck(OU)…
We price European options in a class of models in which the volatility of the underlying risky asset depends on the short rate of interest. Our study results in an explicit pricing formula that depends on knowledge of a characteristic…