Related papers: Asian Option Pricing with Orthogonal Polynomials
The space of call price functions has a natural noncommutative semigroup structure with an involution. A basic example is the Black--Scholes call price surface, from which an interesting inequality for Black--Scholes implied volatility is…
The proposed model modifies option pricing formulas for the basic case of log-normal probability distribution providing correspondence to formulated criteria of efficiency and completeness. The model is self-calibrating by historic…
We justify and give error estimates for binomial approximations of game (Israeli) options in the Black--Scholes market with Lipschitz continuous path dependent payoffs which are new also for usual American style options. We show also that…
In this paper we obtain the formal asymptotic expansion of the logarithms $\ln p_s(\alpha)$ of $p_s(\alpha)$, which are canonical continuations of polynomials of binomial type $p_n(\alpha)$. Our approach is based on linear methods which do…
The incorporation of a dividend yield in the classical option pricing model of Black- Scholes results in a minor modification of the Black-Scholes formula, since the lognormal dynamic of the underlying asset is preserved. However, market…
This paper presents a new asymptotic expansion method for pricing continuously monitoring barrier options. In particular, we develops a semi-group expansion scheme for the Cauchy-Dirichlet problem in the second-order parabolic partial…
We consider the pricing problem related to payoffs that can have discontinuities of polynomial growth. The asset price dynamic is modeled within the Black and Scholes framework characterized by a stochastic volatility term driven by a…
The aim of this paper is to present a simple stochastic model that accounts for the effects of a long-memory in volatility on option pricing. The starting point is the stochastic Black-Scholes equation involving volatility with long-range…
In this paper the valuation problem of a European call option in presence of both stochastic volatility and transaction costs is considered. In the limit of small transaction costs and fast mean reversion, an asymptotic expression for the…
In this article we propose a novel approach to reduce the computational complexity of various approximation methods for pricing discrete time American options. Given a sequence of continuation values estimates corresponding to different…
The distribution of the returns for a stock are not well described by a normal probability density function (pdf). Student's t-distributions, which have fat tails, are known to fit the distributions of the returns. We present pricing of…
In this paper, we introduce a family of discrete rectangular uniform distributions on the natural numbers-referred to as orthogonal dice-characterized by the property that their means equal their variances. These distributions arise…
This paper sets out to provide a general framework for the pricing of average-type options via lower and upper bounds. This class of options includes Asian, basket and options on the volume-weighted average price. We demonstrate that in…
We provide a representation in terms of certain canonical functions for a sequence of polynomials orthogonal with respect to a weight that is strictly positive and analytic on the unit circle. These formulas yield a complete asymptotic…
European options can be priced when returns follow a Student's t-distribution, provided that the asset is capped in value or the distribution is truncated. We call pricing of options using a log Student's t-distribution a Gosset approach,…
This work generalizes the subdiffusive Black-Scholes model by introducing the variable exponent in order to provide adequate descriptions for the option pricing, where the variable exponent may account for the variation of the memory…
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…
We develop a tractable framework for valuing Asian options when trading the underlying generates market impact and execution costs. Starting from a discrete-time, quote-level model, we construct a reference midpoint suitable for Asian…
This paper presents a derivation of the explicit price for the perpetual American put option in the Black-Scholes model, time-capped by the first drawdown epoch beyond a predefined level. We demonstrate that the optimal exercise strategy…
We prove the existence and pointwise lower and upper bounds for the fundamental solution of the degenerate second order partial differential equation related to Geman-Yor stochastic processes, that arise in models for option pricing theory…