Related papers: An approximate closed formula for European Mortgag…
We consider stochastic volatility models under parameter uncertainty and investigate how model derived prices of European options are affected. We let the pricing parameters evolve dynamically in time within a specified region, and…
The Istanbul options were first introduced by Michel Jacques in 1997. These derivatives are considered as an extension of the Asian options. In this paper, we propose an analytical approximation formula for a geometric Istanbul call option…
This paper develops general approaches for pricing various types of American-style Parisian options (down-in/-out, perpetual/finite-maturity) with general payoff functions based on continuous-time Markov chain (CTMC) approximation under…
We propose a model for price formation in financial markets based on clearing of a standard call auction with random orders, and verify its validity for prediction of the daily closing price distribution statistically. The model considers…
This paper presents closed-form analytical formulas for pricing volatility and variance derivatives with nonlinear payoffs under discrete-time observations. The analysis is based on a probabilistic approach assuming that the underlying…
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…
This paper explores the concept of random-time subordination in modelling stock-price dynamics, and We first present results on the Laplace distribution as a Gaussian variance-mixture, in particular a more efficient volatility estimation…
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…
In this paper we study the short-time behavior of the at-the-money implied volatility for European and arithmetic Asian call options with fixed strike price. The asset price is assumed to follow the Bachelier model with a general stochastic…
In this work, we give a generalized formulation of the Black-Scholes model. The novelty resides in considering the Black-Scholes model to be valid on 'average', but such that the pointwise option price dynamics depends on a measure…
The proposed model modifies option pricing formulas for the basic case of log-normal probability distribution providing correspondence to formulated criteria of efficiency and completeness. The model is self-calibrating by historic…
Employing probabilistic techniques we compute best possible upper and lower bounds on the price of an option on one or two assets with continuous piecewise linear payoff function based on prices of simple call options of possibly distinct…
We study the valuation and hedging problem of European options in a market subject to liquidity shocks. Working within a Markovian regime-switching setting, we model illiquidity as the inability to trade. To isolate the impact of such…
This paper implements an efficient numerical algorithm for the time-fractional Black-Scholes model governing European options. The proposed method comprises the Crank-Nicolson approach to discretize the time variable and exponential…
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 this paper, we show that the price of an European call option, whose underlying asset price is driven by the space-time fractional diffusion, can be expressed in terms of rapidly convergent double-series. The series formula can be…
In the first part of this thesis, we focus on American options in the Heston model. We first give an analytical characterization of the value function of an American option as the unique solution of the associated (degenerate) parabolic…
Option pricing formulas are derived from a non-Gaussian model of stock returns. Fluctuations are assumed to evolve according to a nonlinear Fokker-Planck equation which maximizes the Tsallis nonextensive entropy of index $q$. A generalized…
In the paper we consider the problem of valuation of American options written on dividend-paying assets whose price dynamics follow the classical multidimensional Black and Scholes model. We provide a general early exercise premium…
We consider high-dimensional asset price models that are reduced in their dimension in order to reduce the complexity of the problem or the effect of the curse of dimensionality in the context of option pricing. We apply model order…