Related papers: Pricing Weakly Model Dependent Barrier Products
The robust multi-product pricing problem is to determine the prices of a collection of products so as to maximize the worst-case revenue, where the worst case is taken over an uncertainty set of demand models that the firm expects could be…
The vast majority of works on option pricing operate on the assumption of risk neutral valuation, and consequently focus on the expected value of option returns, and do not consider risk parameters, such as variance. We show that it is…
We consider the pricing of American put options in a model-independent setting: that is, we do not assume that asset prices behave according to a given model, but aim to draw conclusions that hold in any model. We incorporate market…
In this paper, we consider the pricing of derivative products that involve dynamic hedging strategies and payments within the planning horizon. Equity-indexed annuities (EIAs), Guaranteed investment certificate (GIC), American and Barrier…
We present tight bounds and heuristics for personalized, multi-product pricing problems. Under mild conditions we show that the best price in the direction of a positive vector results in profits that are guaranteed to be at least as large…
This paper focuses on price-based residential demand response implemented through dynamic adjustments of electricity prices during DR events. It extends existing DR models to a stochastic framework in which customer response is represented…
In recent years probabilistic model checking has become an important area of research because of the diffusion of computational systems of stochastic nature. Despite its great success, standard probabilistic model checking suffers the…
This work investigates the computational burden of pricing binary options in rare event regimes and introduces an adaptation of the adaptive multilevel splitting (AMS) method for financial derivatives. Standard Monte Carlo becomes…
We provided an analytical representation of the price of a barrier option with one type of special moving barrier. We consider the case that risk free rate, dividend rate and stock volatility are time dependent. We get a pricing formula and…
In the framework of Black-Scholes-Merton model of financial derivatives, a path integral approach to option pricing is presented. A general formula to price European path dependent options on multidimensional assets is obtained and…
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…
In the present paper we present a finite element approach for option pricing in the framework of a well-known stochastic volatility model with jumps, the Bates model. In this model the asset log-returns are assumed to follow a…
We consider the problem of computing upper and lower bounds on the price of a European basket call option, given prices on other similar baskets. Although this problem is very hard to solve exactly in the general case, we show that in some…
A statistical decision problem is hidden in the core of option pricing. A simple form for the price C of a European call option is obtained via the minimum Bayes risk, R_B, of a 2-parameter estimation problem, thus justifying calling C…
We propose a machine learning-based extension of the classical binomial option pricing model that incorporates key market microstructure effects. Traditional models assume frictionless markets, overlooking empirical features such as bid-ask…
This paper investigates the pricing of European-style lookback options when the price dynamics of the underlying risky asset are assumed to follow a Markov-modulated Geo-metric Brownian motion; that is, the appreciation rate and the…
We address imbalanced classification, the problem in which a label may have low marginal probability relative to other labels, by weighting losses according to the correct class. First, we examine the convergence rates of the expected…
In this paper, we propose an iterative splitting method to solve the partial differential equations in option pricing problems. We focus on the Heston stochastic volatility model and the derived two-dimensional partial differential equation…
This work studies the valuation of currency options in markets suffering from a financial crisis. We consider a European option where the underlying asset is a foreign currency. We assume that the value of the underlying asset is a…
Traditional insurance pricing relies on risk-based principles that ensure actuarial fairness and solvency but do not explicitly account for policyholders' price sensitivity. We formulate insurance pricing as a decision-making problem and…