Related papers: Asian Option Pricing with Orthogonal Polynomials
We consider polynomials that are orthogonal over an analytic Jordan curve L with respect to a positive analytic weight, and show that each such polynomial of sufficiently large degree can be expanded in a series of certain integral…
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 work, we propose an algorithm to price American options by directly solving the dual minimization problem introduced by Rogers. Our approach relies on approximating the set of uniformly square integrable martingales by a finite…
It is shown that the the popular least squares method of option pricing converges even under very general assumptions. This substantially increases the freedom of creating different implementations of the method, with varying levels of…
The classical linear Black--Scholes model for pricing derivative securities is a popular model in financial industry. It relies on several restrictive assumptions such as completeness, and frictionless of the market as well as the…
We derive error estimates for multinomial approximations of American options in a multidimensional jump--diffusion Merton's model. We assume that the payoffs are Markovian and satisfy Lipschitz type conditions. Error estimates for such type…
This paper performs the numerical analysis and the computation of a Spread option in a market with imperfect liquidity. The number of shares traded in the stock market has a direct impact on the stock's price. Thus, we consider a…
The Black-Scholes theory of option pricing has been considered for many years as an important but very approximate zeroth-order description of actual market behavior. We generalize the functional form of the diffusion of these systems and…
In this manuscript, we analyze the expansions of functions in orthogonal polynomials associated with a general weight function in a multidimensional setting. Such orthogonal polynomials can be obtained by Gram-Schmidt orthogonalization.…
Cai, Song and Kou (2015) [Cai, N., Y. Song, S. Kou (2015) A general framework for pricing Asian options under Markov processes. Oper. Res. 63(3): 540-554] made a breakthrough by proposing a general framework for pricing both discretely and…
The aim of this paper is to investigate the use of close formula approximation for pricing European mortgage options. Under the assumption of logistic duration and normal mortgage rates the underlying price at the option expiry is…
We show how to derive the Black-Scholes model and its generalisation to the `exchange-option' (to exchange one asset for another) via the continuum limit of the Binomial tree. No knowledge of stochastic calculus or partial differential…
We study skew-orthogonal polynomials with respect to the weight function $\exp[-2V(x)]$, with $V(x)=\sum_{K=1}^{2d}(u_{K}/{K})x^{K}$, $u_{2d} > 0$, $d > 0$. A finite subsequence of such skew-orthogonal polynomials arising in the study of…
The Black-Scholes formula for pricing options on stocks and other securities has been generalized by Merton and Garman to the case when stock volatility is stochastic. The derivation of the price of a security derivative with stochastic…
Option pricing models, essential in financial mathematics and risk management, have been extensively studied and recently advanced by AI methodologies. However, American option pricing remains challenging due to the complexity of…
We study the binomial, trinomial, and Black-Scholes-Merton models of option pricing. We present fast parallel discrete-time finite-difference algorithms for American call option pricing under the binomial and trinomial models and American…
Options financial instruments designed to protect investors from the stock market randomness. In 1973, Fisher Black, Myron Scholes and Robert Merton proposed a very popular option pricing method using stochastic differential equations…
In the framework of Black-Scholes-Merton model of financial derivatives, a path integral approach to option pricing is presented. A general formula to price European path dependent options on multidimensional assets is obtained and…
The present article provides an efficient and accurate hybrid method to price American standard options in certain jump-diffusion models as well as American barrier-type options under the Black & Scholes framework. Our method generalizes…
Hayes equivalence is defined on monic polynomials over a finite field $\fq$ in terms of the prescribed leading coefficients and the residue classes modulo a given monic polynomial $Q$. We study the distribution of the number of zeros in a…