Related papers: Pricing Weakly Model Dependent Barrier Products
We investigate the pricing of financial options under the 2-hypergeometric stochastic volatility model. This is an analytically tractable model that reproduces the volatility smile and skew effects observed in empirical market data. Using a…
Most models for barrier pricing are designed to let a market maker tune the model-implied covariance between moves in the asset spot price and moves in the implied volatility skew. This is often implemented with a local…
For a given level of accuracy in option prices, the paper considers the problem of deciding when exactly, as one or more of the pricing parameters change, a barrier option degenerates into a simpler type of option. This problem is…
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…
In this paper we present a very simple way to price a class of barrier options when the underlying process is driven by a huge class of L\'evy processes. To achieve our goal we assume that our market satisfies a symmetry property. In case…
This paper deals with a high-order accurate implicit finite-difference approach to the pricing of barrier options. In this way various types of barrier options are priced, including barrier options paying rebates, and options on…
We reconsider the valuation of barrier options by means of binomial trees from a "forward looking" prospective rather than the more conventional "backward induction" one used by standard approaches. This reformulation allows us to write…
In this paper, we study the option pricing problems for rough volatility models. As the framework is non-Markovian, the value function for a European option is not deterministic; rather, it is random and satisfies a backward stochastic…
In this paper we investigate the pricing problem of a pure endowment contract when the insurer has a limited information on the mortality intensity of the policyholder. The payoff of this kind of policies depends on the residual life time…
We consider stochastic volatility models under parameter uncertainty and investigate how model derived prices of European options are affected. We let the pricing parameters evolve dynamically in time within a specified region, and…
We develop robust pricing and hedging of a weighted variance swap when market prices for a finite number of co--maturing put options are given. We assume the given prices do not admit arbitrage and deduce no-arbitrage bounds on the weighted…
In this paper, we present a reduced basis method for pricing European and American options based on the Black-Scholes and Heston model. To tackle each model numerically, we formulate the problem in terms of a time dependent variational…
Sequential Monte Carlo (SMC) methods have successfully been used in many applications in engineering, statistics and physics. However, these are seldom used in financial option pricing literature and practice. This paper presents SMC method…
The robust option pricing problem is to find upper and lower bounds on fair prices of financial claims using only the most minimal assumptions. It contrasts with the classical, model-based approach and gained prominence in the wake of the…
An efficient conditioning technique, the so-called Brownian Bridge simulation, has previously been applied to eliminate pricing bias that arises in applications of the standard discrete-time Monte Carlo method to evaluate options written on…
We develop quantum algorithms for pricing Asian and barrier options under the Heston model, a popular stochastic volatility model, and estimate their costs, in terms of T-count, T-depth and number of logical qubits, on instances under…
Using a suitable change of probability measure, we obtain a novel Poisson series representation for the arbitrage- free price process of vulnerable contingent claims in a regime-switching market driven by an underlying continuous- time…
We consider arbitrage free valuation of European options in Black-Scholes and Merton markets, where the general structure of the market is known, however the specific parameters are not known. In order to reflect this subjective uncertainty…
In this paper we develop an algorithm to calculate the prices and Greeks of barrier options in a hyper-exponential additive model with piecewise constant parameters. We obtain an explicit semi-analytical expression for the first-passage…
Valuation of Credit Valuation Adjustment (CVA) has become an important field as its calculation is required in Basel III, issued in 2010, in the wake of the credit crisis. Exposure, which is defined as the potential future loss of a default…