Related papers: Quantization-based Bermudan option pricing in the …
The Hull-White one factor model is used to price interest rate options. The parameters of the model are often calibrated to simple liquid instruments, in particular European swaptions. It is therefore very important to have very efficient…
This paper deals with the problem of discrete-time option pricing by the mixed fractional version of Merton model with transaction costs. By a mean-self-financing delta hedging argument in a discrete-time setting, a European call option…
A new approximate Bayesian inferential framework is proposed that exploits multiple information sources -- daily spot returns, high-frequency spot data and option prices -- and enables fast calculation of probabilistic predictions of future…
Options on baskets (linear combinations) of assets are notoriously challenging to price using even the simplest log-normal continuous-time stochastic models for the individual assets. The paper [5] gives a closed form approximation formula…
In the framework of bilateral Gamma stock models we seek for adequate option pricing measures, which have an economic interpretation and allow numerical calculations of option prices. Our investigations encompass Esscher transforms, minimal…
We introduce a new method to calculate the credit exposure of European and path-dependent options. The proposed method is able to calculate accurate expected exposure and potential future exposure profiles under the risk-neutral and the…
We present a numerical method for the frequent pricing of financial derivatives that depends on a large number of variables. The method is based on the construction of a polynomial basis to interpolate the value function of the problem by…
We introduce a new method to price American-style options on underlying investments governed by stochastic volatility (SV) models. The method does not require the volatility process to be observed. Instead, it exploits the fact that the…
We present the method of moments approach to pricing barrier-type options when the underlying is modelled by a general class of jump diffusions. By general principles the option prices are linked to certain infinite dimensional linear…
This paper studies the pricing of European-style Asian options when the price dynamics of the underlying risky asset are assumed to follow a Markov- modulated geometric Brownian motion; that is, the appreciation rate and the volatility of…
We introduce a new approach for the numerical pricing of American options. The main idea is to choose a finite number of suitable excessive functions (randomly) and to find the smallest majorant of the gain function in the span of these…
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…
We consider the problem of choosing prices of a set of products so as to maximize profit, taking into account self-elasticity and cross-elasticity, subject to constraints on the prices. We show that this problem can be formulated as…
We propose a hybrid quantum-classical algorithm, originated from quantum chemistry, to price European and Asian options in the Black-Scholes model. Our approach is based on the equivalence between the pricing partial differential equation…
In this note we consider the maximization of the expected terminal wealth for the setup of quadratic transaction costs. First, we provide a very simple probabilistic solution to the problem. Although the problem was largely studied, as far…
We present new numerical schemes for pricing perpetual Bermudan and American options as well as $\alpha$-quantile options. This includes a new direct calculation of the optimal exercise barrier for early-exercise options. Our approach is…
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 work, we consider the issue of pricing exchange options and spread options with stochastic interest rates. We provide the closed form solution for the exchange option price when interest rate is stochastic. Our result holds when…
We show that time-dependent fluctuations $\{\Delta x\}$ in foreign exchange rates are accurately described by a random walk in a complex plane that is demarcated into the gain (+) and loss (-) sectors. $\{\Delta x\}$ is the outcome of $N$…
We offer multiplication method for factoring big natural numbers which extends the group of the Fermat's and Lehman's factorization algorithms and has run-time complexity $O(n^{1/3})$. This paper is argued the finiteness of proposed…