Related papers: Most-likely-path in Asian option pricing under loc…
We present a path integral method to derive closed-form solutions for option prices in a stochastic volatility model. The method is explained in detail for the pricing of a plain vanilla option. The flexibility of our approach is…
The short maturity limit $T\to 0$ for the implied volatility of an Asian option in the Black-Scholes model is determined by the large deviations property for the time-average of the geometric Brownian motion. In this note we derive the…
The paper develops general, discrete, non-probabilistic market models and minmax price bounds leading to price intervals for European options. The approach provides the trajectory based analogue of martingale-like properties as well as a…
The short-term forecasting of real-time locational marginal price (LMP) and network congestion is considered from a system operator perspective. A new probabilistic forecasting technique is proposed based on a multiparametric programming…
We derive a recursive formula for arithmetic Asian option prices with finite observation times in semimartingale models. The method is based on the relationship between the risk-neutral expectation of the quadratic variation of the return…
We consider the pricing problem related to payoffs that can have discontinuities of polynomial growth. The asset price dynamic is modeled within the Black and Scholes framework characterized by a stochastic volatility term driven by a…
We propose an efficient algorithm for approximate computation of the profile maximum likelihood (PML), a variant of maximum likelihood maximizing the probability of observing a sufficient statistic rather than the empirical sample. The PML…
A new approximate Bayesian inferential framework is proposed that exploits multiple information sources -- daily spot returns, high-frequency spot data and option prices -- and enables fast calculation of probabilistic predictions of future…
This paper discusses the short-maturity behavior of Asian option prices and hedging portfolios. We consider the risk-neutral valuation and the delta value of the Asian option having a H\"older continuous payoff function in a local…
This paper presents a new prediction model for time series data by integrating a time-varying Geometric Brownian Motion model with a pricing mechanism used in financial engineering. Typical time series models such as Auto-Regressive…
The potential of recovering the topology of a grid using solely publicly available market data is explored here. In contemporary whole-sale electricity markets, real-time prices are typically determined by solving the network-constrained…
Using tools from spectral analysis, singular and regular perturbation theory, we develop a systematic method for analytically computing the approximate price of a derivative-asset. The payoff of the derivative-asset may be path-dependent.…
The pricing of financial derivatives, which requires massive calculations and close-to-real-time operations under many trading and arbitrage scenarios, were largely infeasible in the past. However, with the advancement of modern computing,…
The method and characteristics of several approaches to the pricing of discretely monitored arithmetic Asian options on stocks with discrete, absolute dividends are described. The contrast between method behaviors for options with an Asian…
We combine the one-dimensional Monte Carlo simulation and the semi-analytical one-dimensional heat potential method to design an efficient technique for pricing barrier options on assets with correlated stochastic volatility. Our approach…
The distribution of a time integral of geometric Brownian motion is not well understood. To price an Asian option and to obtain measures of its dependence on the parameters of time, strike price, and underlying market price, it is essential…
This paper concerns a local volatility model in which volatility takes two possible values, and the specific value depends on whether the underlying price is above or below a given threshold value. The model is known, and a number of…
We solve the problem of super-hedging European or Asian options for discrete-time financial market models where executable prices are uncertain. The risky asset prices are not described by single-valued processes but measurable selections…
One method to compute the price of an arithmetic Asian option in a Levy driven model is based on the exponential functional of the underlying Levy process: If we know the distribution of the exponential functional, we can calculate the…
We develop a non-parametric, semimartingale optimal transport, calibration methodology for local volatility models with stochastic interest rate. The method finds a fully calibrated model which is the closest, in a way that can be defined…