Related papers: Option Pricing Models Driven by the Space-Time Fra…
In this paper, we show that the price of an European call option, whose underlying asset price is driven by the space-time fractional diffusion, can be expressed in terms of rapidly convergent double-series. The series formula can be…
We show how the prices of options can be determined with the help of double-fractional differential equation in such a way that their inclusion in a portfolio of stocks provides a more reliable hedge against dramatic price drops that the…
Based on empirical market data, a stochastic volatility model is proposed with volatility driven by fractional noise. The model is used to obtain a risk-neutrality option pricing formula and an option pricing equation.
Fractional diffusion equations replace the integer-order derivatives in space and time by their fractional-order analogues. They are used in physics to model anomalous diffusion. This paper develops strong solutions of space-time fractional…
Diffusion processes driven by Fractional Brownian motion (FBM) have often been considered in modeling stock price dynamics in order to capture the long range dependence of stock price observed in reality. Option prices for such models had…
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 present an option pricing formula for European options in a stochastic volatility model. In particular, the volatility process is defined using a fractional integral of a diffusion process and both the stock price and the volatility…
The paper proposes a class of financial market models which are based on inhomogeneous telegraph processes and jump diffusions with alternating volatilities. It is assumed that the jumps occur when the tendencies and volatilities are…
This paper examines the problem of pricing spread options under some models with jumps driven by Compound Poisson Processes and stochastic volatilities in the form of Cox-Ingersoll-Ross(CIR) processes. We derive the characteristic function…
In this short paper, in order to price occupation-time options, such as (double-barrier) step options and quantile options, we derive various joint distributions of a mixed-exponential jump-diffusion process and its occupation times of…
The purpose of this paper is to analyze the problem of option pricing when the short rate follows subdiffusive fractional Merton model. We incorporate the stochastic nature of the short rate in our option valuation model and derive explicit…
Stock price change in financial market occurs through transactions in analogy with diffusion in stochastic physical systems. The analysis of price changes in real markets shows that long-range correlations of price fluctuations largely…
We investigate the problem of pricing derivatives under a fractional stochastic volatility model. We obtain an approximate expression of the derivative price where the stochastic volatility can be composed of deterministic functions of time…
We develop a novel deep learning approach for pricing European options in diffusion models, that can efficiently handle high-dimensional problems resulting from Markovian approximations of rough volatility models. The option pricing partial…
This paper presents the solution to a European option pricing problem by considering a regime-switching jump diffusion model of the underlying financial asset price dynamics. The regimes are assumed to be the results of an observed pure…
We derive the price of a spread option based on two assets which follow a bivariate volatility modulated Volterra process dynamics. Such a price dynamics is particularly relevant in energy markets, modelling for example the spot price of…
In this paper I develop a new computational method for pricing path dependent options. Using the path integral representation of the option price, I show that in general it is possible to perform analytically a partial averaging over the…
We consider call option prices in diffusion models close to expiry, in an asymptotic regime ("moderately out of the money") that interpolates between the well-studied cases of at-the-money options and out-of-the-money fixed-strike options.…
According to the volatility feedback effect, an unexpected increase in squared volatility leads to an immediate decline in the price-dividend ratio. In this paper, we consider the properties of stock price dynamics and option valuations…
We study the approximation of certain stochastic integrals with respect to a d-dimensional diffusion by corresponding stochastic integrals with piece-wise constant integrands. In finance this corresponds to replacing a continuously adjusted…