Related papers: Option pricing under normal dynamics with stochast…
We propose a multi-scale stochastic volatility model in which a fast mean-reverting factor of volatility is built on top of the Heston stochastic volatility model. A singular pertubative expansion is then used to obtain an approximation for…
In this paper we study the pricing of exchange options when underlying assets have stochastic volatility and stochastic correlation. An approximation using a closed-form approximation based on a Taylor expansion of the conditional price is…
A stochastic model for pure-jump diffusion (the compound renewal process) can be used as a zero-order approximation and as a phenomenological description of tick-by-tick price fluctuations. This leads to an exact and explicit general…
We study the pricing of European-style options written on forward contracts within function-valued infinite-dimensional affine stochastic volatility models. The dynamics of the underlying forward price curves are modeled within the…
We price European options in a class of models in which the volatility of the underlying risky asset depends on the short rate of interest. Our study results in an explicit pricing formula that depends on knowledge of a characteristic…
In this paper new analytical and numerical approaches to valuating path-dependent options of European type have been developed. The model of stochastic volatility as a basic model has been chosen. For European options we could improve the…
We provide a nonparametric method for the computation of instantaneous multivariate volatility for continuous semi-martingales, which is based on Fourier analysis. The co-volatility is reconstructed as a stochastic function of time by…
We propose a convolution-FFT method for pricing European options under the Heston model that leverages a continuously differentiable representation of the joint characteristic function. Unlike existing Fourier-based methods that rely on…
The research presented in this article provides an alternative option pricing approach for a class of rough fractional stochastic volatility models. These models are increasingly popular between academics and practitioners due to their…
In financial markets, accurately measuring the risk of future fluctuations in asset prices is of paramount importance. Studies such as Carr and Madan have shown that the expected value of the quadratic variation of log prices can be…
We present a new numerical method to price vanilla options quickly in time-changed Brownian motion models. The method is based on rational function approximations of the Black-Scholes formula. Detailed numerical results are given for a…
We present a multivariate stochastic volatility model with leverage, which is flexible enough to recapture the individual dynamics as well as the interdependencies between several assets while still being highly analytically tractable.…
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…
In this work we present a general representation formula for the price of a vulnerable European option, and the related CVA in stochastic (either rough or not) volatility models for the underlying's price, when admitting correlation with…
Analytical pricing formulas and Greeks are obtained for European and American basket put options using Mellin transforms. We assume assets are driven by geometric Brownian motion which exhibit correlation and pay a continuous dividend rate.…
We consider closed-form approximations for European put option prices within the Heston and GARCH diffusion stochastic volatility models with time-dependent parameters. Our methodology involves writing the put option price as an expectation…
We model the logarithm of the price (log-price) of a financial asset as a random variable obtained by projecting an operator stable random vector with a scaling index matrix $\underline{\underline{E}}$ onto a non-random vector. The scaling…
We consider a discrete-time approximation of paths of an Ornstein--Uhlenbeck process as a mean for estimation of a price of European call option in the model of financial market with stochastic volatility. The Euler--Maruyama approximation…
In this paper we consider Fourier transform techniques to efficiently compute the Value-at-Risk and the Conditional Value-at-Risk of an arbitrary loss random variable, characterized by having a computable generalized characteristic…
We consider a stochastic volatility model where the dynamics of the volatility are given by a possibly infinite linear combination of the elements of the time extended signature of a Brownian motion. First, we show that the model is…