Related papers: American options under periodic exercise opportuni…
We present the method of moments approach to pricing barrier-type options when the underlying is modelled by a general class of jump diffusions. By general principles the option prices are linked to certain infinite dimensional linear…
We study the regularity of the stochastic representation of the solution of a class of initial-boundary value problems related to a regime-switching diffusion. This representation is related to the value function of a finite-horizon optimal…
Bandit problems model the trade-off between exploration and exploitation in various decision problems. We study two-armed bandit problems in continuous time, where the risky arm can have two types: High or Low; both types yield stochastic…
The main objective of this paper is to present an algorithm of pricing perpetual American put options with asset-dependent discounting. The value function of such an instrument can be described as \begin{equation*}…
Several two-boundary problems are solved for a special L\'{e}vy process: the Poisson process with an exponential component. The jumps of this process are controlled by a homogeneous Poisson process, the positive jump size distribution is…
Search strategies based on random walk processes with long-tailed jump length distributions (Levy walks) on the one hand and intermittent behavior switching between local search and ballistic relocation phases on the other, have been…
Motivated by the L\'evy foraging hypothesis -- the premise that various animal species have adapted to follow L\'evy walks to optimize their search efficiency -- we study the parallel hitting time of L\'evy walks on the infinite…
We study the obstacle problem associated with the American chooser option. The obstacle is given by the maximum of an American call option and an American put option, which, in turn, can be expressed as the maximum of the solutions to the…
In American options, the early exercise feature allows the option to be exercised at any time prior to expiration. However, this flexibility introduces a challenge: the pricing model must value the option while simultaneously determining an…
This paper studies de Finetti's optimal dividend problem with capital injection. We confirm the optimality of a double barrier strategy when the underlying risk model follows a L\'evy process that may have positive and negative jumps. The…
We give an analytical characterization of the price function of an American option in Heston-type models. Our approach is based on variational inequalities and extends recent results of Daskalopoulos and Feehan (2011). We study the…
We consider the general class of spectrally positive L\'evy risk processes, which are appropriate for businesses with continuous expenses and lump sum gains whose timing and sizes are stochastic. Motivated by the fact that dividends cannot…
The virtue of an American option is that it can be exercised at any time. This right is particularly valuable when there is model uncertainty. Yet almost all the extensive literature on American options assumes away model uncertainty. This…
In this paper we present qualitative and quantitative comparison of various analytical and numerical approximation methods for calculating a position of the early exercise boundary of the American put option paying zero dividends. First we…
L\'evy walks are continuous time random walks with spatio-temporal coupling of jump lengths and waiting times, often used to model superdiffusive spreading processes such as animals searching for food, tracer motion in weakly chaotic…
We prove that the perpetual American put option price of level dependent volatility model with compound Poisson jumps is convex and is the classical solution of its associated quasi-variational inequality, that it is $C^2$ except at the…
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…
We introduce a new method to price American options based on Chebyshev interpolation. In each step of a dynamic programming time-stepping we approximate the value function with Chebyshev polynomials. The key advantage of this approach is…
In this paper we study the mean of the first exit time from a bounded interval of various L\'evy processes. We establish sharp two-sided estimates of the mean for L\'evy processes under certain condition on their characteristic exponents.…
Statistical inference for stochastic processes based on high-frequency observations has been an active research area for more than a decade. One of the most well-known and widely studied problems is that of estimation of the quadratic…