Related papers: A moment matching method for option pricing under …
This article investigates parameter estimation of affine term structure models by means of the generalized method of moments. Exact moments of the affine latent process as well as of the yields are obtained by using results derived for…
This papers addresses the stock option pricing problem in a continuous time market model where there are two stochastic tradable assets, and one of them is selected as a num\'eraire. It is shown that the presence of arbitrarily small…
Affine processes play an important role in mathematical finance and other applied areas due to their tractable structure. In the present article, we derive probabilistic representations and integration by parts (IBP) formulas for…
Continuous time models in the theory of real options give explicit formulas for optimal exercise strategies when options are simple and the price of an underlying asset follows a geometric Brownian motion. This paper suggests a general,…
We derive semi-analytic approximation formulae for bond and swaption prices in a Black-Karasi\'{n}ski interest rate model. Approximations are obtained using a novel technique based on the Karhunen-Lo\`{e}ve expansion. Formulas are easily…
We present closed analytical approximations for the pricing of Asian basket spread options under the Black-Scholes model. The formulae are obtained by using a stochastic Taylor expansion around a log-normal proxy model and are found to be…
We present new high order approximations schemes for the Cox-Ingersoll-Ross (CIR) process that are obtained by using a recent technique developed by Alfonsi and Bally (2021) for the approximation of semigroups. The idea consists in using a…
This study deals with the problem of pricing European currency options in discrete time setting, whose prices follow the fractional Black Scholes model with transaction costs. Both the pricing formula and the fractional partial differential…
A new method for stochastic control based on neural networks and using randomisation of discrete random variables is proposed and applied to optimal stopping time problems. The method models directly the policy and does not need the…
We study an algorithm which has been proposed by Chinesta et al. to solve high-dimensional partial differential equations. The idea is to represent the solution as a sum of tensor products and to compute iteratively the terms of this sum.…
In this paper we study the short-time behavior of the at-the-money implied volatility for arithmetic Asian options with fixed strike price. The asset price is assumed to follow the Black-Scholes model with a general stochastic volatility…
This paper investigates analytic properties of American option prices under the finite moment log-stable (FMLS) model. Under this model the price of American options is characterised by the free boundary problem of a fractional partial…
There is a vast literature on numerical valuation of exotic options using Monte Carlo, binomial and trinomial trees, and finite difference methods. When transition density of the underlying asset or its moments are known in closed form, it…
In a seminal paper in 1973, Black and Scholes argued how expected distributions of stock prices can be used to price options. Their model assumed a directed random motion for the returns and consequently a lognormal distribution of asset…
We study the Option pricing with linear investment strategy based on discrete time trading of the underlying security, which unlike the existing continuous trading models provides a feasible real market implementation. Closed form formulas…
This project attempts to address the problem of asset pricing in a financial market, where the interest rates and volatilities exhibit regime switching. This is an extension of the Black-Scholes model. Studies of Markov-modulated regime…
We introduce a stacking version of the Monte Carlo algorithm in the context of option pricing. Introduced recently for aeronautic computations, this simple technique, in the spirit of current machine learning ideas, learns control variates…
In financial mathematics, it is a typical approach to approximate financial markets operating in discrete time by continuous-time models such as the Black Scholes model. Fitting this model gives rise to difficulties due to the discrete…
We propose a versatile Monte-Carlo method for pricing and hedging options when the market is incomplete, for an arbitrary risk criterion (chosen here to be the expected shortfall), for a large class of stochastic processes, and in the…
In this paper, we develop novel numerical methods based on the Multi-Point Flux Approximation (MPFA) method to solve the degenerated partial differential equation (PDE) arising from pricing two-assets options. The standard MPFA is used as…