Related papers: Option pricing in exponential L\'evy models with t…
The challenge to fruitfully merge state-of-the-art techniques from mathematical finance and numerical analysis has inspired researchers to develop fast deterministic option pricing methods. As a result, highly efficient algorithms to…
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 investigate the pricing of cliquet options in a jump-diffusion model. The considered option is of monthly sum cap style while the underlying stock price model is driven by a drifted L\'{e}vy process entailing a Brownian diffusion…
We propose a very efficient method for pricing various types of lookback options under Markov models. We utilize the model-free representations of lookback option prices as integrals of first passage probabilities. We combine efficient…
This paper considers exponential utility indifference pricing for a multidimensional non-traded assets model subject to inter-temporal default risk, and provides a semigroup approximation for the utility indifference price. The key tool is…
We apply multilevel Monte Carlo for option pricing problems using exponential L\'{e}vy models with a uniform timestep discretisation to monitor the running maximum required for lookback and barrier options. The numerical results demonstrate…
The article is devoted to models of financial markets with stochastic volatility, which is defined by a functional of Ornstein-Uhlenbeck process or Cox-Ingersoll-Ross process. We study the question of exact price of European option. The…
In this paper, we study the exponential utility indifference pricing of pure endowment policies within a stochastic-factor model for an insurer who also invests in a financial market. Our framework incorporates a hazard rate modeled as an…
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…
Within a path integral formalism for non-Gaussian price fluctuations we set up a simple stochastic calculus and derive a natural martingale for option pricing from the wealth balance of options, stocks, and bonds. The resulting formula is…
An investor with constant absolute risk aversion trades a risky asset with general It\^o-dynamics, in the presence of small proportional transaction costs. In this setting, we formally derive a leading-order optimal trading policy and the…
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 consider a general local-stochastic volatility model and an investor with exponential utility. For a European-style contingent claim, whose payoff may depend on either a traded or non-traded asset, we derive an explicit approximation for…
Using a Levy process we generalize formulas in Bo et al.(2010) for the Esscher transform parameters for the log-normal distribution which ensure the martingale condition holds for the discounted foreign exchange rate. Using these values of…
This paper considers the valuation of exotic path-dependent options in L\'evy models, in particular options on the supremum and the infimum of the asset price process. Using the Wiener--Hopf factorization, we derive expressions for the…
We provide a bound for the error committed when using a Fourier method to price European options when the underlying follows an exponential \levy dynamic. The price of the option is described by a partial integro-differential equation…
This paper presents a derivation of the explicit price for the perpetual American put option time-capped by the first drawdown epoch beyond a predefined level. We consider the market in which an asset price is described by geometric L\'evy…
We investigate exponential stock models driven by tempered stable processes, which constitute a rich family of purely discontinuous L\'{e}vy processes. With a view of option pricing, we provide a systematic analysis of the existence of…
We derive an extremal fractional Gaussian by employing the L\'evy-Khintchine theorem and L\'evian noise. With the fractional Gaussian we then generalize the Black-Scholes-Merton option-pricing formula. We obtain an easily applicable and…
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…