Related papers: Closed-End Formula for options linked to Target Vo…
We study optimal liquidation strategies under partial information for a single asset within a finite time horizon. We propose a model tailored for high-frequency trading, capturing price formation driven solely by order flow through…
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…
Purpose: This study introduces a novel framework for identifying and exploiting predictive lead-lag relationships in financial markets. We propose an integrated approach that combines advanced statistical methodologies with machine learning…
We propose a deep hedging framework for index option portfolios, grounded in a realistic market simulator that captures the joint dynamics of S&P 500 returns and the full implied volatility surface. Our approach integrates surface-informed…
In this paper we study pricing of American put options on the Black and Scholes market with a stochastic interest rate and finite-time maturity. We prove that the option value is a $C^1$ function of the initial time, interest rate and stock…
Reliability Options are capacity remuneration mechanisms aimed at enhancing security of supply in electricity systems. They can be framed as call options on electricity sold by power producers to System Operators. This paper provides a…
This paper investigates the optimal choices of financial derivatives to complete a financial market in the framework of stochastic volatility (SV) models. We introduce an efficient and accurate simulation-based method, applicable to…
This paper gives an arbitrage-free prediction for future prices of an arbitrary co-terminal set of options with a given maturity, based on the observed time series of these option prices. The statistical analysis of such a multi-dimensional…
This article considers the pricing and hedging of a call option when liquidity matters, that is, either for a large nominal or for an illiquid underlying asset. In practice, as opposed to the classical assumptions of a price-taking agent in…
In this paper, a new numerical method based on adaptive gradient descent optimizers is provided for computing the implied volatility from the Black-Scholes (B-S) option pricing model. It is shown that the new method is more accurate than…
The need for control strategies that can address dynamic system uncertainty is becoming increasingly important. In this work, we propose a Model Predictive Control by quantifying the risk of failure in our system model. The proposed control…
We consider the problem of finding a consistent upper price bound for exotic options whose payoff depends on the stock price at two different predetermined time points (e.g. Asian option), given a finite number of observed call prices for…
We consider the robust pricing and hedging of American options in a continuous time setting. We assume asset prices are continuous semimartingales, but we allow for general model uncertainty specification via adapted closed convex…
The purpose of this survey chapter is to present a transformation technique that can be used in analysis and numerical computation of the early exercise boundary for an American style of vanilla options that can be modelled by class of…
This paper focuses on the pricing of continuous geometric Asian options (GAOs) under a multifactor stochastic volatility model. The model considers fast and slow mean reverting factors of volatility, where slow volatility factor is…
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…
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…
Recent literature seek to forecast implied volatility derived from equity, index, foreign exchange, and interest rate options using latent factor and parametric frameworks. Motivated by increased public attention borne out of the…
We consider two data-driven approaches to hedging, Reinforcement Learning and Deep Trajectory-based Stochastic Optimal Control, under a stepwise mean-variance objective. We compare their performance for a European call option in 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.