Related papers: Option pricing in bilateral Gamma stock models
We introduce a new method to price American options based on Chebyshev interpolation. In each step of a dynamic programming time-stepping we approximate the value function with Chebyshev polynomials. The key advantage of this approach is…
We consider so-called regular invertible Gaussian Volterra processes and derive a formula for their prediction laws. Examples of such processes include the fractional Brownian motions and the mixed fractional Brownian motions. As an…
We provide analytical tools for pricing power options with exotic features (capped or log payoffs, gap options ...) in the framework of exponential L\'evy models driven by one-sided stable or tempered stable processes. Pricing formulas take…
This paper studies four trading algorithms of a professional trader at a multilateral trading facility, observing a realistic two-sided limit order book whose dynamics are driven by the order book events. The identity of the trader can be…
This article presents fast lower and upper estimates for a large class of options: the class of constrained multiple exercise American options. Typical options in this class are swing options with volume and timing constraints, and passport…
Quadratic hedging of option payoffs generates the variance optimal martingale measure. When an option features an exercise policy and its cash flows are hedged according to this approach, it may be tempting to optimize such a policy under…
In the paper, the pricing of Quanto options is studied, where the underlying foreign asset and the exchange rate are correlated with each other. Firstly, we adopt Bayesian methods to estimate unknown parameters entering the pricing formula…
The key objective of this paper is to develop an empirical model for pricing SPX options that can be simulated over future paths of the SPX. To accomplish this, we formulate and rigorously evaluate several statistical models, including…
We consider the pricing of derivatives in a setting with trading restrictions, but without any probabilistic assumptions on the underlying model, in discrete and continuous time. In particular, we assume that European put or call options…
We present a methodology to price options and portfolios of options on a gate-based quantum computer using amplitude estimation, an algorithm which provides a quadratic speedup compared to classical Monte Carlo methods. The options that we…
It is well-known that, in the Bachelier model, when asset prices and volatilities are uncorrelated, the implied volatility coincides with the fair value of the volatility swap. In this paper, via classical It\^o calculus and Taylor…
When the underlying stock price is a strict local martingale process under an equivalent local martingale measure, Black-Scholes PDE associated with an European option may have multiple solutions. In this paper, we study an approximation…
American options are studied in a general discrete market in the presence of proportional transaction costs, modelled as bid-ask spreads. Pricing algorithms and constructions of hedging strategies, stopping times and martingale…
This article consolidates and extends past work on derivative pricing adjustments, including XVA, by providing an encapsulating representation of the adjustment between any two derivative pricing functions, within an Ito SDE/parabolic PDE…
By investigating model-independent bounds for exotic options in financial mathematics, a martingale version of the Monge-Kantorovich mass transport problem was introduced in \cite{BeiglbockHenry…
Option contracts can be valued by using the Black-Scholes equation, a partial differential equation with initial conditions. An exact solution for European style options is known. The computation time and the error need to be minimized…
This paper concerns the design of a Fourier based pseudospectral numerical method for the model of European Option Pricing with transaction costs under Exponential Utility derived by Davis, Panas and Zariphopoulou. Computing the option…
It is known from previous work of the authors that non-negative arbitrage free price processes in finance can be described in terms of filtered likelihood processes of statistical experiments and vice versa. The present paper summarizes and…
Recent progress in the development of efficient computational algorithms to price financial derivatives is summarized. A first algorithm is based on a path integral approach to option pricing, while a second algorithm makes use of a neural…
In this paper we introduce an additive two-factor model for electricity futures prices based on Normal Inverse Gaussian L\'evy processes, that fulfills a no-overlapping-arbitrage (NOA) condition. We compute European option prices by Fourier…