Related papers: Option Pricing Incorporating Factor Dynamics in Co…
In this paper we study the pricing of exchange options under a dynamic described by stochastic correlation with random jumps. In particular, we consider a Ornstein-Uhlenbeck covariance model with Levy Background Noise Process driven by…
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,…
In recent literature it is claimed that BitCoin price behaves more likely to a volatile stock asset than a currency and that changes in its price are influenced by sentiment about the BitCoin system itself; in Kristoufek [10] the author…
In a market with transaction costs, the price of a derivative can be expressed in terms of (preconsistent) price systems (after Kusuoka (1995)). In this paper, we consider a market with binomial model for stock price and discuss how to…
We model the price of a stock via a Lang\'{e}vin equation with multi-dimensional fluctuations coupled in the price and in time. We generalize previous models in that we assume that the fluctuations conditioned on the time step are compound…
We study the effect of investor inertia on stock price fluctuations with a market microstructure model comprising many small investors who are inactive most of the time. It turns out that semi-Markov processes are tailor made for modelling…
The paper studies sub and super-replication price bounds for contingent claims defined on general trajectory based market models. No prior probabilistic or topological assumptions are placed on the trajectory space, trading is assumed to…
Global oil price is an important factor in determining many economic variables in the world's economy. It is generally modeled as a stochastic process and have been studied through different techniques by comparing the historic time series…
Energy companies need efficient procedures to perform market calibration of stochastic models for commodities. If the Black framework is chosen for option pricing, the bottleneck of the market calibration is the computation of the variance…
Accurate option pricing is essential for effective trading and risk management in financial markets, yet it remains challenging due to market volatility and the limitations of traditional models like Black-Scholes. In this paper, we…
In this paper we introduce a new approach to model-free path-dependent option pricing. We first introduce a general duality result for linear optimisation problems over signed measures introduced in [3] and show how the the problem of…
It is a well known fact that local scale invariance plays a fundamental role in the theory of derivative pricing. Specific applications of this principle have been used quite often under the name of `change of numeraire', but in recent work…
This paper performs the numerical analysis and the computation of a Spread option in a market with imperfect liquidity. The number of shares traded in the stock market has a direct impact on the stock's price. Thus, we consider a…
The author seeks to develop a model to alter the bid-offer spread, currently quoted by market makers, that varies with the market and trading conditions. The dynamic nature of financial markets and trading, as with the rest of social…
We propose three different data-driven approaches for pricing European-style call options using supervised machine-learning algorithms. These approaches yield models that give a range of fair prices instead of a single price point. The…
The instability of the Ivancevic option pricing model is studied through the variational method. We have analytically derived the dispersion relation of the IOPM for both constant volatility and Landau coefficient model and time-dependent…
Starting from the Avellaneda-Stoikov framework, we consider a market maker who wants to optimally set bid/ask quotes over a finite time horizon, to maximize her expected utility. The intensities of the orders she receives depend not only on…
The present paper proposes a new framework for describing the stock price dynamics. In the traditional geometric Brownian motion model and its variants, volatility plays a vital role. The modern studies of asset pricing expand around…
Refining a discrete model of Cheuk and Vorst we obtain a closed formula for the price of a European lookback option at any time between emission and maturity. We derive an asymptotic expansion of the price as the number of periods tends to…
We study a random version of the population-market model proposed by Arlot, Marmi and Papini in Arlot et al. (2019). The latter model is based on the Yoccoz-Birkeland integral equation and describes a time evolution of livestock commodities…