Related papers: Semi-closed form prices of barrier options in the …
In this paper, an integral equation representation for the early exercise boundary of an American option contract is considered. Thus far, a number of different techniques have been proposed in the literature to obtain a variety of integral…
In this paper, we consider option pricing in a framework of the fractional Heston-type model with $H>1/2$. As it is impossible to obtain an explicit formula for the expectation $\mathbb E f(S_T)$ in this case, where $S_T$ is the asset price…
In this paper, we derive closed-form formulas of first-order approximation for down-and-out barrier and floating strike lookback put option prices under a stochastic volatility model, by using an asymptotic approach. To find the explicit…
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…
Option contracts can be valued by using the Black-Scholes equation, a partial differential equation with initial conditions. An exact solution for European style options is known. The computation time and the error need to be minimized…
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…
We develop a theory for option pricing with perfect hedging in an inefficient market model where the underlying price variations are autocorrelated over a time tau. This is accomplished by assuming that the underlying noise in the system is…
We investigate qualitative and quantitative behavior of a solution of the mathematical model for pricing American style of perpetual put options. We assume the option price is a solution to the stationary generalized Black-Scholes equation…
In the framework of Black-Scholes-Merton model of financial derivatives, a path integral approach to option pricing is presented. A general formula to price European path dependent options on multidimensional assets is obtained and…
Path integral method in quantum mechanics provides a new thinking for barrier option pricing. For proportional double-barrier step (PDBS) options, the option price changing process is analogous to a particle moving in a finite symmetric…
We derive a closed-form solution for the price of an average price as well as an average strike geometric Asian option, by making use of the path integral formulation. Our results are compared to a numerical Monte Carlo simulation. We also…
Geometric Asian options are a type of options where the payoff depends on the geometric mean of the underlying asset over a certain period of time. This paper is concerned with the pricing of such options for the class of Volterra-Heston…
We investigate the pricing of financial options under the 2-hypergeometric stochastic volatility model. This is an analytically tractable model that reproduces the volatility smile and skew effects observed in empirical market data. Using a…
There exist several methods how more general options can be priced with call prices. In this article, we extend these results to cover a wider class of options and market models. In particular, we introduce a new pricing formula which can…
In this paper, we focus on option pricing models based on space-time fractional diffusion. We briefly revise recent results which show that the option price can be represented in the terms of rapidly converging double-series and apply these…
We derive a forward partial integro-differential equation for prices of call options in a model where the dynamics of the underlying asset under the pricing measure is described by a -possibly discontinuous- semimartingale. A uniqueness…
Most of the empirical studies on stochastic volatility dynamics favor the 3/2 specification over the square-root (CIR) process in the Heston model. In the context of option pricing, the 3/2 stochastic volatility model is reported to be able…
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…
Assuming that price of the underlying stock is moving in range bound, the Black-Scholes formula for options pricing supports a separation of variables. The resulting time-independent equation is solved employing different behavior of the…
In the present paper, we introduce a numerical scheme for the price of a barrier option when the price of the underlying follows a diffusion process. The numerical scheme is based on an extension of a static hedging formula of barrier…