Related papers: Pricing Weakly Model Dependent Barrier Products
We analyze the relative price change of assets starting from basic supply/demand considerations subject to arbitrary motivations. The resulting stochastic differential equation has coefficients that are functions of supply and demand. We…
In this paper incomplete-information models are developed for the pricing of securities in a stochastic interest rate setting. In particular we consider credit-risky assets that may include random recovery upon default. The market…
No-arbitrage models of term structure have the feature that the return on zero-coupon bonds is the sum of the short rate and the product of volatility and market price of risk. Well known models restrict the behavior of the market price of…
Risk-neutral pricing dictates that the discounted derivative price is a martingale in a measure equivalent to the economic measure. The residual ambiguity for incomplete markets is here resolved by minimising the entropy of the price…
The determination of acceptability prices of contingent claims requires the choice of a stochastic model for the underlying asset price dynamics. Given this model, optimal bid and ask prices can be found by stochastic optimization. However,…
In a model with no given probability measure, we consider asset pricing in the presence of frictions and other imperfections and characterize the property of coherent pricing, a notion related to (but much weaker than) the no arbitrage…
We consider economic obstacles that limit the reliability and accuracy of value-at-risk (VaR). Investors who manage large market transactions should take into account the impact of the randomness of large trade volumes on predictions of…
Introduced in the late 90s, the passport option gives its holder the right to trade in a market and receive any positive gain in the resulting traded account at maturity. Pricing the option amounts to solving a stochastic control problem…
We propose a dependence-aware predictive modeling framework for multivariate risks stemmed from an insurance contract with bundling features - an important type of policy increasingly offered by major insurance companies. The bundling…
We show how to price and replicate a variety of barrier-style claims written on the $\log$ price $X$ and quadratic variation $\langle X \rangle$ of a risky asset. Our framework assumes no arbitrage, frictionless markets and zero interest…
Accurate quantification of safety is essential for the design of autonomous systems. In this paper, we present a methodology to characterize the exact probabilities associated with invariance and recovery in safe control. We consider a…
We consider the problem of dynamic pricing of a product in the presence of feature-dependent price sensitivity. Developing practical algorithms that can estimate price elasticities robustly, especially when information about no purchases…
In this Article, a fast numerical numerical algorithm for pricing discrete double barrier option is presented. According to Black-Scholes model, the price of option in each monitoring date can be evaluated by a recursive formula upon the…
We consider the problem of finding model-independent bounds on the price of an Asian option, when the call prices at the maturity date of the option are known. Our methods differ from most approaches to model-independent pricing in that we…
American put options are among the most frequently traded single stock options, and their calibration is computationally challenging since no closed-form expression is available. Due to the higher flexibility in comparison to European…
This papers addresses the stock option pricing problem in a continuous time market model where there are two stochastic tradable assets, and one of them is selected as a num\'eraire. It is shown that the presence of arbitrarily small…
We consider option pricing using a discrete-time Markov switching stochastic volatility with co-jump model, which can model volatility clustering and varying mean-reversion speeds of volatility. For pricing European options, we develop a…
Consider a discrete finite-dimensional, Markovian market model. In this setting, discretely sampled American options can be priced using the so-called ``non-recombining'' tree algorithm. By successively increasing the number of exercise…
It is well-known that selling different goods in a single bundle can significantly increase revenue. However, bundling is no longer profitable if the goods have high production costs. To overcome this challenge, we introduce a new…
Pricing decisions stand out as one of the most critical tasks a company faces, particularly in today's digital economy. As with other business decision-making problems, pricing unfolds in a highly competitive and uncertain environment.…