Related papers: A Numerical Method for Pricing Discrete Double Bar…
The Black-Scholes Option pricing model (BSOPM) has long been in use for valuation of equity options to find the prices of stocks. In this work, using BSOPM, we have come up with a comparative analytical approach and numerical technique to…
We derive a forward equation for arbitrage-free barrier option prices, in terms of Markovian projections of the stochastic volatility process, in continuous semi-martingale models. This provides a Dupire-type formula for the coefficient…
In this paper, we present an implicit finite difference method for the numerical solution of the Black-Scholes model of American put options without dividend payments. We combine the proposed numerical method by using a front fixing…
In this paper we investigate a nonlinear generalization of the Black-Scholes equation for pricing American style call options in which the volatility term may depend on the underlying asset price and the Gamma of the option. We propose a…
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…
Options have provided a field of much study because of the complexity involved in pricing them. The Black-Scholes equations were developed to price options but they are only valid for European styled options. There is added complexity when…
It is well known that the Black-Scholes-Merton model suffers from several deficiencies. Jump-diffusion and Levy models have been widely used to partially alleviate some of the biases inherent in this classical model. Unfortunately, the…
We study the problem of reconstruction of special special time dependent local volatility from market prices of options with different strikes at two expiration times. For a general diffusion process we apply the linearization technique and…
Quantization algorithms have been successfully adopted to option pricing in finance thanks to the high convergence rate of the numerical approximation. In particular, very recently, recursive marginal quantization has been proven to be a…
We analyze the empirical performance of several non-parametric estimators of the pricing functional for European options, using historical put and call prices on the S&P500 during the year 2012. Two main families of estimators are…
We provide an European option pricing formula written in the form of an infinite series of Black Scholes type terms under double Levy jumps model, where both the interest rate and underlying price are driven by Levy process. The series…
We develop a quantum algorithm to price discretely monitored lookback options in the Black-Scholes framework using imaginary time evolution. By rewriting the pricing PDE as a Schrodinger-type equation, the problem becomes the imaginary time…
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…
We consider robust pricing and hedging for options written on multiple assets given market option prices for the individual assets. The resulting problem is called the multi-marginal martingale optimal transport problem. We propose two…
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…
Deep hedging is a framework for hedging derivatives in the presence of market frictions. In this study, we focus on the problem of hedging a given target option by using multiple options. To extend the deep hedging framework to this…
In this work, we present a quantum algorithm designed to solve the differential equation used in the pricing of Asian options, in the framework of the Black-Scholes model. Our approach modifies an existing quantum pre-conditioning method…
In this paper we propose two efficient techniques which allow one to compute the price of American basket options. In particular, we consider a basket of assets that follow a multi-dimensional Black-Scholes dynamics. The proposed…
This study deals with the problem of pricing European currency options in discrete time setting, whose prices follow the fractional Black Scholes model with transaction costs. Both the pricing formula and the fractional partial differential…
For pricing American options, %after suitable discretization in space and time, a sequence of discrete linear complementarity problems (LCPs) or equivalently Hamilton-Jacobi-Bellman (HJB) equations need to be solved in a sequential…