Related papers: Efficient Pricing of Barrier Options on High Volat…
Quanto options allow the buyer to exchange the foreign currency payoff into the domestic currency at a fixed exchange rate. We investigate quanto options with multiple underlying assets valued in different foreign currencies each with a…
The use of sequential Monte Carlo within simulation for path-dependent option pricing is proposed and evaluated. Recently, it was shown that explicit solutions and importance sampling are valuable for efficient simulation of spot price and…
In this paper we present an algorithm for pricing barrier options in one-dimensional Markov models. The approach rests on the construction of an approximating continuous-time Markov chain that closely follows the dynamics of the given…
In this work we are concerned with valuing optionalities associated to invest or to delay investment in a project when the available information provided to the manager comes from simulated data of cash flows under historical (or…
We consider the problem of pricing path-dependent options on a basket of underlying assets using simulations. As an example we develop our studies using Asian options. Asian options are derivative contracts in which the underlying variable…
This study provides a consistent and efficient pricing method for both Standard & Poor's 500 Index (SPX) options and the Chicago Board Options Exchange's Volatility Index (VIX) options under a multiscale stochastic volatility model. To…
There are no known exact formulas for the valuation of a number of exotic options, and this is particularly true for options under discrete monitoring and for American style options. Therefore, one usually recourses to a Monte Carlo…
In this article we consider the problem of pricing and hedging high-dimensional Asian basket options by Quasi-Monte Carlo simulation. We assume a Black-Scholes market with time-dependent volatilities and show how to compute the deltas by…
Derivatives on the Chicago Board Options Exchange volatility index (VIX) have gained significant popularity over the last decade. The pricing of VIX derivatives involves evaluating the square root of the expected realised variance which…
Estimation and prediction in high dimensional multivariate factor stochastic volatility models is an important and active research area because such models allow a parsimonious representation of multivariate stochastic volatility. Bayesian…
Recent years have seen an increased level of interest in pricing equity options under a stochastic volatility model such as the Heston model. Often, simulating a Heston model is difficult, as a standard finite difference scheme may lead to…
We propose a new `hedged' Monte-Carlo (HMC) method to price financial derivatives, which allows to determine simultaneously the optimal hedge. The inclusion of the optimal hedging strategy allows one to reduce the financial risk associated…
We introduce a stacking version of the Monte Carlo algorithm in the context of option pricing. Introduced recently for aeronautic computations, this simple technique, in the spirit of current machine learning ideas, learns control variates…
We propose a novel algorithm which allows to sample paths from an underlying price process in a local volatility model and to achieve a substantial variance reduction when pricing exotic options. The new algorithm relies on the construction…
The latter author, together with collaborators, proposed a numerical scheme to calculate the price of barrier options. The scheme is based on a symmetrization of diffusion process. The present paper aims to give a mathematical credit to the…
We propose a versatile Monte-Carlo method for pricing and hedging options when the market is incomplete, for an arbitrary risk criterion (chosen here to be the expected shortfall), for a large class of stochastic processes, and in the…
The pricing of options, warrants and other derivative securities is one of the great success of financial economics. These financial products can be modeled and simulated using quantum mechanical instruments based on a Hamiltonian…
The literature on volatility modelling and option pricing is a large and diverse area due to its importance and applications. This paper provides a review of the most significant volatility models and option pricing methods, beginning with…
We provided an analytical representation of the price of a barrier option with one type of special moving barrier. We consider the case that risk free rate, dividend rate and stock volatility are time dependent. We get a pricing formula and…
Opportunities for stochastic arbitrage in an options market arise when it is possible to construct a portfolio of options which provides a positive option premium and which, when combined with a direct investment in the underlying asset,…