Related papers: Quantization-based Bermudan option pricing in the …
We extend the viscosity solution characterization proved in [5] for call/put American option prices to the case of a general payoff function in a multi-dimensional setting: the price satisfies a semilinear re-action/diffusion type equation.…
The purpose of this paper is to analyze the problem of option pricing when the short rate follows subdiffusive fractional Merton model. We incorporate the stochastic nature of the short rate in our option valuation model and derive explicit…
We consider a method of lines (MOL) approach to determine prices of European and American exchange options when underlying asset prices are modelled with stochastic volatility and jump-diffusion dynamics. As the MOL, as with any other…
In this paper we introduce and study the concept of optimal and surely optimal dual martingales in the context of dual valuation of Bermudan options, and outline the development of new algorithms in this context. We provide a…
Pricing financial or real options with arbitrary payoffs in regime-switching models is an important problem in finance. Mathematically, it is to solve, under certain standard assumptions, a general form of optimal stopping problems in…
Currency arbitrage capitalizes on price discrepancies in currency exchange rates between markets to produce profits with minimal risk. By employing a combinatorial optimization problem, one can ascertain optimal paths within directed…
In this paper we study recent developments in the approximation of the spread option pricing. As the Kirk\'s Approximation is extremely flawed in the cases when the correlation is very high, we explore a recent development that allows…
This dissertation develops and justifies a novel method for deriving approximate formulas to estimate two parameters in stochastic volatility diffusion models with exponentially-affine characteristic functions and single- or two-factor…
We study American swaptions in the linear-rational (LR) term structure model introduced in [5]. The American swaption pricing problem boils down to an optimal stopping problem that is analytically tractable. It reduces to a free-boundary…
The pricing of options, warrants and other derivative securities is one of the great success of financial economics. These financial products can be modeled and simulated using quantum mechanical instruments based on a Hamiltonian…
We estimate prices of exotic options in a discrete-time model-free setting when the trader has access to market prices of a rich enough class of exotic and vanilla options. This is achieved by estimating an unobservable quantity called…
We present a semi-static hedging algorithm for callable interest rate derivatives under an affine, multi-factor term-structure model. With a traditional dynamic hedge, the replication portfolio needs to be updated continuously through time…
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.
Nowadays many financial derivatives, such as American or Bermudan options, are of early exercise type. Often the pricing of early exercise options gives rise to high-dimensional optimal stopping problems, since the dimension corresponds to…
Financial derivative pricing is a significant challenge in finance, involving the valuation of instruments like options based on underlying assets. While some cases have simple solutions, many require complex classical computational methods…
In this paper we study the pricing of exchange options under a dynamic described by stochastic correlation with random jumps. In particular, we consider a Ornstein-Uhlenbeck covariance model with Levy Background Noise Process driven by…
The accurate valuation of financial derivatives plays a pivotal role in the finance industry. Although closed formulas for pricing are available for certain models and option types, exemplified by the European Call and Put options in the…
Optimisation algorithms designed to work on quantum computers or other specialised hardware have been of research interest in recent years. Many of these solver can only optimise problems that are in binary and quadratic form. Quadratic…
Recently, an Almost-Exact Simulation (AES) scheme was introduced for the Heston stochastic volatility model and tested for European option pricing. This paper extends this scheme for pricing Bermudan and American options under both Heston…
Currency arbitrage leverages price discrepancies in currency exchange rates across different currency pairs to gain risk-free profits. It involves multiple trading, where short-lived price discrepancies require real-time, high-speed…