Related papers: Efficient Pricing of Barrier Options on High Volat…
We consider robust pricing and hedging for options written on multiple assets given market option prices for the individual assets. The resulting problem is called the multi-marginal martingale optimal transport problem. We propose two…
Rough Volterra volatility models are a progressive and promising field of research in derivative pricing. Although rough fractional stochastic volatility models already proved to be superior in real market data fitting, techniques used in…
We consider the problem of simulating loss probabilities and conditional excesses for linear asset portfolios under the t-copula model. Although in the literature on market risk management there are papers proposing efficient variance…
In commodity and energy markets swing options allow the buyer to hedge against futures price fluctuations and to select its preferred delivery strategy within daily or periodic constraints, possibly fixed by observing quoted futures…
We use Lie symmetry methods to price certain types of barrier options. Usually Lie symmetry methods cannot be used to solve the Black-Scholes equation for options because the function defining the maturity condition for an option is not…
In the present paper, we introduce a numerical scheme for the price of a barrier option when the price of the underlying follows a diffusion process. The numerical scheme is based on an extension of a static hedging formula of barrier…
The Heston stochastic volatility model is a standard model for valuing financial derivatives, since it can be calibrated using semi-analytical formulas and captures the most basic structure of the market for financial derivatives with…
Some expansion methods have been proposed for approximately pricing options which has no exact closed formula. Benhamou et al. (2010) presents the smart expansion method that directly expands the expectation value of payoff function with…
Hamiltonian approach in quantum mechanics provides a new thinking for barrier option pricing. For proportional floating barrier step options, the option price changing process is similar to the one dimensional trapezoid potential barrier…
A critical problem in the financial world deals with the management of risk, from regulatory risk to portfolio risk. Many such problems involve the analysis of securities modelled by complex dynamics that cannot be captured analytically,…
The real options approach is now considered an effective alternative to the corporate DCF model for a feasibility study. The current paper offers a practical methodology employing binomial trees and real options techniques for evaluating…
The robust option pricing problem is to find upper and lower bounds on fair prices of financial claims using only the most minimal assumptions. It contrasts with the classical, model-based approach and gained prominence in the wake of the…
In this paper we present two parallel Monte Carlo based algorithms for pricing multi--dimensional Bermudan/American options. First approach relies on computation of the optimal exercise boundary while the second relies on classification of…
In this work we detail the application of a fast convolution algorithm computing high dimensional integrals to the context of multiplicative noise stochastic processes. The algorithm provides a numerical solution to the problem of…
Process variations are a major concern in today's chip design since they can significantly degrade chip performance. To predict such degradation, existing circuit and MEMS simulators rely on Monte Carlo algorithms, which are typically too…
In this paper, we derive closed-form formulas of first-order approximation for down-and-out barrier and floating strike lookback put option prices under a stochastic volatility model, by using an asymptotic approach. To find the explicit…
We discuss the pricing methodology for Bonus Certificates and Barrier Reverse-Convertible Structured Products. Pricing for a European barrier condition is straightforward for products of both types and depends on an efficient interpolation…
In this paper, we employ the Heston stochastic volatility model to describe the stock's volatility and apply the model to derive and analyze the optimal trading strategies for dealers in a security market. We also extend our study to option…
This paper describes a new Monte Carlo method based on a novel stochastic potential switching algorithm. This algorithm enables the equilibrium properties of a system with potential $V$ to be computed using a Monte Carlo simulation for a…
Fast pricing of American-style options has been a difficult problem since it was first introduced to financial markets in 1970s, especially when the underlying stocks' prices follow some jump-diffusion processes. In this paper, we propose a…