Related papers: Implied Stopping Rules for American Basket Options…
In this paper, we study a retailer price optimization problem which includes the practical constraints: maximum number of price changes and minimum amount of price change (if a change is recommended). We provide a closed-form formula for…
Mathematically, the execution of an American-style financial derivative is commonly reduced to solving an optimal stopping problem. Breaking the general assumption that the knowledge of the holder is restricted to the price history of the…
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…
In this paper, we price American-style Parisian down-and-in call options under the Black-Scholes framework. Usually, pricing an American-style option is much more difficult than pricing its European-style counterpart because of the…
Treating high dimensionality is one of the main challenges in the development of computational methods for solving problems arising in finance, where tasks such as pricing, calibration, and risk assessment need to be performed accurately…
We present closed analytical approximations for the pricing of Asian basket spread options under the Black-Scholes model. The formulae are obtained by using a stochastic Taylor expansion around a log-normal proxy model and are found to be…
We propose a numerical procedure for computing the prices of European options, in which the underlying asset price is a Markovian strict local martingale. If the underlying process is a strict local martingale and the payoff is of linear…
Theoretical models applied to option pricing should take into account the empirical characteristics of the underlying financial time series. In this paper, we show how to price basket options when assets follow a shifted log-normal process…
In this paper we use Bernstein and Chebyshev polynomials to approximate the price of some basket options under a bivariate Black-Scholes model. The method consists in expanding the price of a univariate related contract after conditioning…
Martingale optimal transport (MOT) often yields broad price bounds for options, constraining their practical applicability. In this study, we extend MOT by incorporating causality constraints among assets, inspired by the nonanticipativity…
We consider the classical mathematical economics problem of {\em Bayesian optimal mechanism design} where a principal aims to optimize expected revenue when allocating resources to self-interested agents with preferences drawn from a known…
We study a specific class of finite-horizon mean field optimal stopping problems by means of the dynamic programming approach. In particular, we consider problems where the state process is not affected by the stopping time. Such problems…
We consider the problem of valuation of American options written on dividend-paying assets whose price dynamics follows a multidimensional exponential Levy model. We carefully examine the relation between the option prices, related partial…
We study a class of stochastic target games where one player tries to find a strategy such that the state process almost-surely reaches a given target, no matter which action is chosen by the opponent. Our main result is a geometric dynamic…
Using a fast numerical technique, we investigate a large database of investor suboptimal non-exercise of short maturity American call options on dividend-paying stocks listed on the Dow Jones. The correct modelling of the discrete dividend…
We develop a novel deep learning approach for pricing European options in diffusion models, that can efficiently handle high-dimensional problems resulting from Markovian approximations of rough volatility models. The option pricing partial…
In a classical optimal stopping problem the aim is to maximize the expected value of a functional of a diffusion evaluated at a stopping time. This note considers optimal stopping problems beyond this paradigm. We study problems in which…
We develop a method to solve, theoretically and numerically, general optimal stopping problems. Our general setting allows for multiple exercise rights, i.e., optimal multiple stopping, for a robust evaluation that accounts for model…
This paper examines a Markovian model for the optimal irreversible investment problem of a firm aiming at minimizing total expected costs of production. We model market uncertainty and the cost of investment per unit of production capacity…
This paper starts by defining the criteria where the early-exercise of an American option is never optimal, under positive, or negative rates. It follows with a short analysis of the various shapes of the exercise region under negative…