Related papers: Some pricing tools for the Variance Gamma model
The objective of the paper is to price weather contracts using temperature as the underlying process when the later follows a mean-reverting dynamics driven by a time-changed Brownian motion coupled to a Gamma Levy subordinator and…
In this paper we analyze a nonlinear Black--Scholes model for option pricing under variable transaction costs. The diffusion coefficient of the nonlinear parabolic equation for the price $V$ is assumed to be a function of the underlying…
The accuracy of least squares calibration using option premiums and particle filtering of price data to find model parameters is determined. Derivative models using exponential L\'evy processes are calibrated using regularized weighted…
We provide an integral representation for the (implied) copulas of dependent random variables in terms of their moment generating functions. The proof uses ideas from Fourier methods for option pricing. This representation can be used for a…
This paper proposes a market consistent valuation framework for variable annuities with guaranteed minimum accumulation benefit, death benefit and surrender benefit features. The setup is based on a hybrid model for the financial market and…
Exact path simulation of the underlying state variable is of great practical importance in simulating prices of financial derivatives or their sensitivities when there are no analytical solutions for their pricing formulas. However, in…
We propose a numerical method for the valuation of European-style options under two-asset infinite-activity exponential L\'evy models. Our method extends the effective approach developed by Wang, Wan & Forsyth (2007) for the 1-dimensional…
We consider the problem of valuation of American options written on dividend-paying assets whose price dynamics follows a multidimensional exponential Levy model. We carefully examine the relation between the option prices, related partial…
The problem of European-style option pricing in time-changed L\'{e}vy models in the presence of compound Poisson jumps is considered. These jumps relate to sudden large drops in stock prices induced by political or economical hits. As the…
Efficiently pricing multi-asset options is a challenging problem in quantitative finance. When the characteristic function is available, Fourier-based methods are competitive compared to alternative techniques because the integrand in the…
In a stochastic volatility framework, we find a general pricing equation for the class of payoffs depending on the terminal value of a market asset and its final quadratic variation. This allows a pricing tool for European-style claims…
L\'{e}vy processes with completely monotone jumps appear frequently in various applications of probability. For example, all popular stock price models based on L\'{e}vy processes (such as the Variance Gamma, CGMY/KoBoL and Normal Inverse…
The aim of this article is to provide a systematic analysis of the conditions such that Fourier transform valuation formulas are valid in a general framework; i.e. when the option has an arbitrary payoff function and depends on the path of…
In this paper, we give a numerical method for pricing long maturity, path dependent options by using the Markov property for each underlying asset. This enables us to approximate a path dependent option by using some kinds of plain…
The pricing of currency options is largely dependent on the dynamic relationship between a pair of currencies. Typically, the pricing of options with payoffs dependent on multi-assets becomes tricky for reasons such as the non-Gaussian…
Pricing of high-dimensional options is a deep problem of the Theoretical Financial Mathematics. In this article we present a new class of L\'{e}vy driven models of stock markets. In our opinion, any market model should be based on a…
The paper Borovkova et al. [4] uses moment matching method to obtain closed form formulas for spread and basket call option prices under log normal models. In this note, we also use moment matching method to obtain semi-closed form formulas…
Spread options are a fundamental class of derivative contract written on multiple assets, and are widely used in a range of financial markets. There is a long history of approximation methods for computing such products, but as yet there is…
This article is the second one in a series on the use of scaling invariance in finance. In the first article (cond-mat/9906048), we introduced a new formalism for the pricing of derivative securities, which focusses on tradable objects…
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…