Related papers: A Numerical Method for Pricing Discrete Double Bar…
We propose a stable sixth-order compact finite difference scheme with a dynamic fifth-order staggered boundary scheme and 3(2) R-K Bogacki and Shampine adaptive time stepping for pricing American style options. To locate, fix and compute…
The Black-Scholes option pricing model remains a cornerstone in financial mathematics, yet its application is often challenged by the need for accurate hedging strategies, especially in dynamic market environments. This paper presents a…
An option market maker incurs funding costs when carrying and hedging inventory. To hedge a net long delta inventory, for example, she pays a fee to borrow stock from the securities lending market. Because of haircuts, she posts additional…
A new mathematical model for the Black-Scholes equation is proposed to forecast option prices. This model includes new interval for the price of the underlying stock as well as new initial and boundary conditions. Conventional notions of…
Current state-of-the-art discrete optimization methods struggle behind when it comes to challenging contrast-enhancing discrete energies (i.e., favoring different labels for neighboring variables). This work suggests a multiscale approach…
For a given level of accuracy in option prices, the paper considers the problem of deciding when exactly, as one or more of the pricing parameters change, a barrier option degenerates into a simpler type of option. This problem is…
We present a new numerical method to price vanilla options quickly in time-changed Brownian motion models. The method is based on rational function approximations of the Black-Scholes formula. Detailed numerical results are given for a…
This paper examines a class of barrier options-multi-step barrier options, which can have any finite number of barriers of any level. We obtain a general, explicit expression of option prices of this type under the Black-Scholes model.…
Setting an effective reserve price for strategic bidders in repeated auctions is a central question in online advertising. In this paper, we investigate how to set an anonymous reserve price in repeated auctions based on historical bids in…
We consider the pricing of derivatives written on the discretely sampled realized variance of an underlying security. In the literature, the realized variance is usually approximated by its continuous-time limit, the quadratic variation of…
This paper presents a real-time optimization method for nonlinear model predictive control (NMPC) of systems governed by partial differential equations (PDEs). The NMPC problem to be solved is formulated by discretizing the PDE system in…
We consider a system of coupled free boundary problems for pricing American put options with regime-switching. To solve this system, we first employ the logarithmic transformation to map the free boundary for each regime to multi-fixed…
Subdiffusion is a well established phenomenon in physics. In this paper we apply the subdiffusive dynamics to analyze financial markets. We focus on the financial aspect of time fractional diffusion model with moving boundary i.e. American…
In this paper, we investigate a numerical algorithm for the pricing of swing options, relying on the so-called optimal quantization method. The numerical procedure is described in details and numerous simulations are provided to assert its…
In this paper, we provide a unified treatment of the Vanna-Volga pricing technique. We derive the value of single and double barriers FX options, as well as closed formulas for the Delta, Vega, Vanna and Volga of those contracts.
This article presents fast lower and upper estimates for a large class of options: the class of constrained multiple exercise American options. Typical options in this class are swing options with volume and timing constraints, and passport…
We propose a method for pricing American options whose pay-off depends on the moving average of the underlying asset price. The method uses a finite dimensional approximation of the infinite-dimensional dynamics of the moving average…
We show that prices and shortfall risks of game (Israeli) barrier options in a sequence of binomial approximations of the Black--Scholes (BS) market converge to the corresponding quantities for similar game barrier options in the BS market…
This paper introduces a fast and numerically stable algorithm for the solution of fourth-order linear boundary value problems on an interval. This type of equation arises in a variety of settings in physics and signal processing. Our method…
This paper presents a new model for options pricing. The Black-Scholes-Merton (BSM) model plays an important role in financial options pricing. However, the BSM model assumes that the risk-free interest rate, volatility, and equity premium…