Related papers: Dirichlet Forms and Finite Element Methods for the…
In incomplete financial markets, pricing and hedging European options lack a unique no-arbitrage solution due to unhedgeable risks. This paper introduces a constrained deep learning approach to determine option prices and hedging strategies…
We present an analytic approach to solve a degenerate parabolic problem associated to the Heston model, which is widely used in mathematical finance to derive the price of an European option on an risky asset with stochastic volatility. We…
Using the Donsker-Prokhorov invariance principle we extend the Kim-Stoyanov-Rachev-Fabozzi option pricing model to allow for variably-spaced trading instances, an important consideration for short-sellers of options. Applying the…
We propose the deep parametric PDE method to solve high-dimensional parametric partial differential equations. A single neural network approximates the solution of a whole family of PDEs after being trained without the need of sample…
This work focuses on the indifference pricing of American call option underlying a non-traded stock, which may be partially hedgeable by another traded stock. Under the exponential forward measure, the indifference price is formulated as a…
We show that the frequent claim that the implied tree prices exotic options consistently with the market is untrue if the local volatilities are subject to change and the market is arbitrage-free. In the process, we analyse -- in the most…
The stochastic-alpha-beta-rho (SABR) model has been widely adopted in options trading. In particular, the normal ($\beta=0$) SABR model is a popular model choice for interest rates because it allows negative asset values. The option price…
A virtual element discretisation for the numerical approximation of the three-field formulation of linear poroelasticity introduced in [R. Oyarz\'ua and R. Ruiz-Baier, Locking-free finite element methods for poroelasticity, SIAM J. Numer.…
We investigate the relation between the fair price for European-style vanilla options and the distribution of short-term returns on the underlying asset ignoring transaction and other costs. We compute the risk-neutral probability density…
This paper presents a structure-preserving spatial discretization method for distributed parameter port-Hamiltonian systems. The class of considered systems are hyperbolic systems of two conservation laws in arbitrary spatial dimension and…
We develop an interpolation-based modeling framework for parameter-dependent partial differential equations arising in control, inverse problems, and uncertainty quantification. The solution is discretized in the physical domain using…
We propose and analyze a general framework for space-time finite element methods that is based on least-squares finite element methods for solving a first-order reformulation of the thick parabolic obstacle problem. Discretizations based on…
In this article, we analyze semi-discrete finite element approximation and full discretization of a fourth-order stochastic pseudo-parabolic equation in a bounded convex polygonal domain driven by additive Wiener noise. We use the finite…
The full discretization of the semi-linear stochastic wave equation is considered. The discontinuous Galerkin finite element method is used in space and analyzed in a semigroup framework, and an explicit stochastic position Verlet scheme is…
We present a simplified model consisting on two linear elliptic boundary-value problems that represent a single step and single fixed-point iteration in an electrochemical battery model. The main variables are the concentration and the…
In this paper we will consider distributed Linear-Quadratic Optimal Control Problems dealing with Advection-Diffusion PDEs for high values of the P\'eclet number. In this situation, computational instabilities occur, both for steady and…
It is a market practice to express market-implied volatilities in some parametric form. The most popular parametrizations are based on or inspired by an underlying stochastic model, like the Heston model (SVI method) or the SABR model (SABR…
We consider option pricing using a discrete-time Markov switching stochastic volatility with co-jump model, which can model volatility clustering and varying mean-reversion speeds of volatility. For pricing European options, we develop a…
Strong and weak approximation errors of a spatial finite element method are analyzed for stochastic partial differential equations(SPDEs) with one-sided Lipschitz coefficients, including the stochastic Allen--Cahn equation, driven by…
Most of the empirical studies on stochastic volatility dynamics favor the 3/2 specification over the square-root (CIR) process in the Heston model. In the context of option pricing, the 3/2 stochastic volatility model is reported to be able…