Related papers: An Option Pricing Model with Memory
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…
We study the pricing of European-style options written on forward contracts within function-valued infinite-dimensional affine stochastic volatility models. The dynamics of the underlying forward price curves are modeled within the…
In this paper new analytical and numerical approaches to valuating path-dependent options of European type have been developed. The model of stochastic volatility as a basic model has been chosen. For European options we could improve the…
In this paper we study dynamic pricing mechanisms of financial derivatives. A typical model of such pricing mechanism is the so-called g--expectation defined by solutions of a backward stochastic differential equation with g as its…
Given the marginal distribution information of the underlying asset price at two future times $T_1$ and $T_2$, we consider the problem of determining a model-free upper bound on the price of a class of American options that must be…
Global oil price is an important factor in determining many economic variables in the world's economy. It is generally modeled as a stochastic process and have been studied through different techniques by comparing the historic time series…
We consider call option prices in diffusion models close to expiry, in an asymptotic regime ("moderately out of the money") that interpolates between the well-studied cases of at-the-money options and out-of-the-money fixed-strike options.…
This paper considers the pricing of long-term options on assets such as housing, where either government intervention or the economic nature of the asset is assumed to limit large falls in prices. The observed asset price is modelled by a…
Differential equations can be used to construct predictive models of a diverse set of real-world phenomena like heat transfer, predator-prey interactions, and missile tracking. In our work, we explore one particular application of…
We consider a discrete-time approximation of paths of an Ornstein--Uhlenbeck process as a mean for estimation of a price of European call option in the model of financial market with stochastic volatility. The Euler--Maruyama approximation…
In this article, we study the rate of convergence of prices when a model is approximated by some simplified model. We also provide a method how explicit error formula for more general options can be obtained if such formula is available for…
The mathematical model of a linear system with the short memory about own stochastic behavior is proposed. It is assumed that the system is under a continual influence of independent stochastic impulses. In a short memory approximation the…
A generalization of the economic model of logistic growth, which takes into account the effects of memory and crises, is suggested. Memory effect means that the economic factors and parameters at any given time depend not only on their…
This paper proposes an adaptive mechanism for price signal generation using a piecewise linear approximation of a flexibility function with unknown parameters. In this adaptive approach, the price signal is parameterized and the parameters…
We derive a general multivariate theory for realised characteristics of `model-free discretisation-invariant swaps', so-called because the standard no-arbitrage assumption of martingale forward prices is sufficient to derive fair-value swap…
A new model for stocks markets using integer values for each stock price is presented. In contrast with previously reported models, the variables used in the model are not of binary type, but of more general integer type. It is shown how…
We model the stock price dynamics through a semi-Markov process obtained using a Poisson random measure. We establish the existence and uniqueness of the classical solution of a non-homogeneous terminal value problem and we show that the…
In commodity and energy markets swing options allow the buyer to hedge against futures price fluctuations and to select its preferred delivery strategy within daily or periodic constraints, possibly fixed by observing quoted futures…
Pricing financial or real options with arbitrary payoffs in regime-switching models is an important problem in finance. Mathematically, it is to solve, under certain standard assumptions, a general form of optimal stopping problems in…
Based on the analog between the stochastic dynamics and quantum harmonic oscillator, we propose a market force driving model to generalize the Black-Scholes model in finance market. We give new schemes of option pricing, in which we can…