Related papers: Option pricing in time-changed L\'{e}vy models wit…

This paper develops a model for the bid and ask prices of a European type asset by formulating a stochastic control problem. The state process is governed by a modified geometric Brownian motion whose drift and diffusion coefficients depend…

This paper presents a new model for options pricing. The Black-Scholes-Merton (BSM) model plays an important role in financial options pricing. However, the BSM model assumes that the risk-free interest rate, volatility, and equity premium…

It is well known how to determine the price of perpetual American options if the underlying stock price is a time-homogeneous diffusion. In the present paper we consider the inverse problem, that is, given prices of perpetual American…

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…

This paper shows that jumps in financial asset prices are often erroneously identified and are, in fact, rare events accounting for a very small proportion of the total price variation. We apply new econometric techniques to a comprehensive…

We study the optimal stopping of an American call option in a random time-horizon under exponential spectrally negative L\'evy models. The random time-horizon is modeled as the so-called Omega default clock in insurance, which is the first…

We obtain option pricing formulas for stock price models in which the drift and volatility terms are functionals of a continuous history of the stock prices. That is, the stock dynamics follows a nonlinear stochastic functional differential…

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…

We address the information content of European option prices about volatility in terms of the Fisher information matrix. We assume that observed option prices are centred on the theoretical price provided by Heston's model disturbed by…

We consider a novel use case for the Double Heston model (Christoffersen et al,, 2009), where the two Heston sub-variances have different spot/volatility correlations but the same volatility of volatility and mean reversion speed. This…

We construct a general stochastic process and prove weak convergence results. It is scaled in space and through the parameters of its distribution. We show that our simplified scaling is equivalent to time scaling used frequently. The…

This paper studies a class of optimal multiple stopping problems driven by L\'evy processes. Our model allows for a negative effective discount rate, which arises in a number of financial applications, including stock loans and real…

We derive a small-time expansion for out-of-the-money call options under an exponential Levy model, using the small-time expansion for the distribution function given in Figueroa-Lopez & Houdre (2009), combined with a change of num\'eraire…

We introduce an algorithm for the pricing of finite expiry American options driven by L\'evy processes. The idea is to tweak Carr's `Canadisation' method, cf. Carr [9] (see also Bouchard et al [5]), in such a way that the adjusted algorithm…

We consider the problem of finding model-independent bounds on the price of an Asian option, when the call prices at the maturity date of the option are known. Our methods differ from most approaches to model-independent pricing in 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…

In this paper we extend the theory of option pricing to take into account and explain the empirical evidence for asset prices such as non-Gaussian returns, long-range dependence, volatility clustering, non-Gaussian copula dependence, as…

In this paper, we derive identities for the upward and downward exit problems and resolvents for a process whose motion changes between two L\'evy processes if it is above (or below) a barrier $b$ and coincides with a Poissonian arrival…

In exponential semi-martingale setting for risky asset we estimate the difference of prices of options when initial physical measure $P$ and corresponding martingale measure $Q$ change to $\tilde{P}$ and $\tilde{Q}$ respectively. Then, we…

The asymptotic behavior of the implied volatility associated with a general call pricing function has been extensively studied in the last decade. The main topics discussed in this paper are Lee's moment formulas for the implied volatility,…