Related papers: Quantization-based Bermudan option pricing in the …
The problem of pricing Bermudan options using Monte Carlo and a nonparametric regression is considered. We derive optimal non-asymptotic bounds for a lower biased estimate based on the suboptimal stopping rule constructed using some…
This paper provides a methodology for fast and accurate pricing of the long-dated contracts that arise as the building blocks of insurance and pension fund agreements. It applies the recursive marginal quantization (RMQ) and joint recursive…
In this paper we propose an efficient method to compute the price of multi-asset American options, based on Machine Learning, Monte Carlo simulations and variance reduction technique. Specifically, the options we consider are written on a…
Recursive Marginal Quantization (RMQ) allows fast approximation of solutions to stochastic differential equations in one-dimension. When applied to two factor models, RMQ is inefficient due to the fact that the optimization problem is…
This paper describes a fast and stable algorithm for evaluating Bermudan swaption under the two factor Hull-White model. We discretize the calculation of the expected value in the evaluation of Bermudan swaption by numerical integration,…
Under the assumption of no-arbitrage, the pricing of American and Bermudan options can be casted into optimal stopping problems. We propose a new adaptive simulation based algorithm for the numerical solution of optimal stopping problems in…
This paper is devoted to the pricing of Barrier options by optimal quadratic quantization method. From a known useful representation of the premium of barrier options one deduces an algorithm similar to one used to estimate nonlinear filter…
This paper develops a new dual approach to compute the hedging portfolio of a Bermudan option and its initial value. It gives a "purely dual" algorithm following the spirit of Rogers (2010) in the sense that it only relies on the dual…
Quantization algorithms have been successfully adopted to option pricing in finance thanks to the high convergence rate of the numerical approximation. In particular, very recently, recursive marginal quantization has been proven to be a…
The quanto option is a cross-currency derivative in which the pay-off is given in foreign currency and then converted to domestic currency, through a constant exchange rate, used for the conversion and determined at contract inception.…
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…
We study the local volatility function in the Foreign Exchange market where both domestic and foreign interest rates are stochastic. This model is suitable to price long-dated FX derivatives. We derive the local volatility function and…
In this paper, we introduce two novel methods to solve the American-style option pricing problem and its dual form at the same time using neural networks. Without applying nested Monte Carlo, the first method uses a series of neural…
One of the most fundamental questions in quantitative finance is the existence of continuous-time diffusion models that fit market prices of a given set of options. Traditionally, one employs a mix of intuition, theoretical and empirical…
American and Bermudan-type financial instruments are often priced with specific Monte Carlo techniques whose efficiency critically depends on the effective dimensionality of the problem and the available computational power. In our work we…
During recent years the counterparty risk subject has received a growing attention because of the so called Basel Accord. In particular the Basel III Accord asks the banks to fulfill finer conditions concerning counterparty credit exposures…
We suggest an intermediate currency approach that allows us to price options on all FX markets simultaneously under the same risk-neutral measure which ensures consistency of FX option prices across all markets. In particular, it is…
Option written on several foreign exchange rates (FXRs) depends on correlation between the rates. To evaluate the option, historical estimates for correlations can be used but usually they are not stable. More significantly, pricing of the…
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…
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…