Related papers: A Note on Utility Indifference Pricing with Delaye…
We study super-replication of contingent claims in markets with delayed filtration. The first result in this paper reveals that in the Black--Scholes model with constant delay the super-replication price is prohibitively costly and leads to…
The vast majority of works on option pricing operate on the assumption of risk neutral valuation, and consequently focus on the expected value of option returns, and do not consider risk parameters, such as variance. We show that it is…
In this work, we expand the idea of Samuelson[3] and Shepp[2,5,6] for stock optimization using the Bachelier model [4] as our models for the stock price at the money (X[stock price]= K[strike price]) for the American call and put options…
This paper concerns the design of a Fourier based pseudospectral numerical method for the model of European Option Pricing with transaction costs under Exponential Utility derived by Davis, Panas and Zariphopoulou. Computing the option…
In this article, we investigate the behavior of long-term options. In many cases, option prices follow an exponential decay (or growth) rate for further maturity dates. We determine under what conditions option prices are characterized by…
To cope with the negative oil futures price caused by the COVID-19 recession, global commodity futures exchanges temporarily switched the option model from Black--Scholes to Bachelier in 2020. This study reviews the literature on…
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…
We consider Bayesian estimation of information-theoretic quantities from data, using a Dirichlet prior. Acknowledging the uncertainty of the event space size $m$ and the Dirichlet prior's concentration parameter $c$, we treat both as random…
We introduce a new cost function over experiments, f-information, based on the theory of multivariate statistical divergences, that generalizes Sims's classic model of rational inattention as well as the class of posterior-separable cost…
In the regime switching extension of Black-Scholes-Merton model of asset price dynamics, one assumes that the volatility coefficient evolves as a hidden pure jump process. Under the assumption of Markov regime switching, we have considered…
In this Article, a fast numerical numerical algorithm for pricing discrete double barrier option is presented. According to Black-Scholes model, the price of option in each monitoring date can be evaluated by a recursive formula upon the…
We develop a numerical method for pricing multidimensional vanilla options in the Black-Scholes framework. In low dimensions, we improve an adaptive integration algorithm proposed by two of the authors by introducing a new splitting…
We consider the optimal investment and marginal utility pricing problem of a risk averse agent and quantify their exposure to a small amount of model uncertainty. Specifically, we compute explicitly the first-order sensitivity of their…
The paper focuses on pricing European-style options on several underlying assets under the Black-Scholes model represented by a nonstationary partial differential equation. The proposed method combines the Galerkin method with…
We study information elicitation in cost-function-based combinatorial prediction markets when the market maker's utility for information decreases over time. In the sudden revelation setting, it is known that some piece of information will…
Consistently fitting vanilla option surfaces is an important issue when it comes to modelling in finance. Local volatility models introduced by Dupire in 1994 are widely used to price and manage the risks of structured products. However,…
We present an adaptive approach for valuing the European call option on assets with stochastic volatility. The essential feature of the method is a reduction of uncertainty in latent volatility due to a Bayesian learning procedure. Starting…
We derive the price of a spread option based on two assets which follow a bivariate volatility modulated Volterra process dynamics. Such a price dynamics is particularly relevant in energy markets, modelling for example the spot price of…
According to the volatility feedback effect, an unexpected increase in squared volatility leads to an immediate decline in the price-dividend ratio. In this paper, we consider the properties of stock price dynamics and option valuations…
The mean objective of this paper is to derive an explicit formula for a price of an European option associated to the underlying delayed stock price which follows a linear differential equation with a general delay in the drift term. We use…