Related papers: Nonparametric Predictive Inference for Asian optio…
In this paper, we present a data-driven ensemble approach for option price prediction whose derivation is based on the no-arbitrage theory of option pricing. Using the theoretical treatment, we derive a common representation space for…
This paper presents a framework of imitating the principal investor's behavior for optimal pricing and hedging options. We construct a non-deterministic Markov decision process for modeling stock price change driven by the principal…
In this note we discuss - in what is intended to be a pedagogical fashion - FX option pricing in target zones with attainable boundaries. The boundaries must be reflecting. The no-arbitrage requirement implies that the differential (foreign…
In ecological studies niche overlap is often used to quantify species interaction and dynamics. This paper develops a robust, nonparametric statistical framework for quantifying and analyzing multivariate niche overlap. Parametric methods…
We propose a simple and efficient approach to generate a prediction intervals (PI) for approximated and forecasted trends. Our method leverages a weighted asymmetric loss function to estimate the lower and upper bounds of the PI, with the…
We present a parallel algorithm that computes the ask and bid prices of an American option when proportional transaction costs apply to the trading of the underlying asset. The algorithm computes the prices on recombining binomial trees,…
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…
Cai, Song and Kou (2015) [Cai, N., Y. Song, S. Kou (2015) A general framework for pricing Asian options under Markov processes. Oper. Res. 63(3): 540-554] made a breakthrough by proposing a general framework for pricing both discretely and…
We apply a physics-informed deep-learning approach the PINN approach to the Black-Scholes equation for pricing American and European options. We test our approach on both simulated as well as real market data, compare it to…
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…
Automatic Differentiation Variational Inference (ADVI) is efficient in learning probabilistic models. Classic ADVI relies on the parametric approach to approximate the posterior. In this paper, we develop a spline-based nonparametric…
Currently, there are no convincing proxies for the fundamentals of cryptocurrency assets. We propose a new market-to-fundamental ratio, the price-to-utility (PU) ratio, utilizing unique blockchain accounting methods. We then proxy various…
We investigate high frequency price dynamics in foreign exchange market using data from Reuters information system (the dataset has been provided to us by Ols en & Associates). In our analysis we show that a na\"ive approach to the…
In the paper, the pricing of Quanto options is studied, where the underlying foreign asset and the exchange rate are correlated with each other. Firstly, we adopt Bayesian methods to estimate unknown parameters entering the pricing formula…
Accurate prediction of electricity prices plays an essential role in the electricity market. To reflect the uncertainty of electricity prices, price intervals are predicted. This paper proposes a novel prediction interval construction…
This paper addresses the challenges of pricing exotic options and structured products, which traditional models often fail to handle due to their inability to capture real-world market phenomena like fat-tailed distributions and volatility…
In the information-based approach to asset pricing the market filtration is modelled explicitly as a superposition of signals concerning relevant market factors and independent noise. The rate at which the signal is revealed to the market…
Proof that under simple assumptions, such as constraints of Put-Call Parity, the probability measure for the valuation of a European option has the mean derived from the forward price which can, but does not have to be the risk-neutral one,…
Traditional competitive markets do not account for negative externalities; indirect costs that some participants impose on others, such as the cost of over-appropriating a common-pool resource (which diminishes future stock, and thus…
We reconsider the problem of option pricing using historical probability distributions. We first discuss how the risk-minimisation scheme proposed recently is an adequate starting point under the realistic assumption that price increments…