Related papers: Analytic formula for option margin with liquidity …

We consider the pricing and hedging of exotic options in a model-independent set-up using \emph{shortfall risk and quantiles}. We assume that the marginal distributions at certain times are given. This is tantamount to calibrating the model…

We propose a new model for electricity pricing based on the price cap principle. The particularity of the model is that the asset price is an exponential functional of a jump L\'evy process. This model can capture both mean reversion and…

We discuss utility based pricing and hedging of jump diffusion processes with emphasis on the practical applicability of the framework. We point out two difficulties that seem to limit this applicability, namely drift dependence and…

This paper analyses the implementation and calibration of the Heston Stochastic Volatility Model. We first explain how characteristic functions can be used to estimate option prices. Then we consider the implementation of the Heston model,…

We consider the problem of option pricing under stochastic volatility models, focusing on the linear approximation of the two processes known as exponential Ornstein-Uhlenbeck and Stein-Stein. Indeed, we show they admit the same limit…

This paper uses the development of multi-agent market models to present a unified approach to the joint questions of how financial market movements may be simulated, predicted, and hedged against. We examine the effect of different market…

We construct algorithms for computation of prices and superhedging strategies for game options in general discrete markets both from the seller and the buyer points of view.

We consider a general problem of the calculus of variations on time scales with a cost functional that is the composition of a certain scalar function with delta and nabla integrals of a vector valued field. Euler-Lagrange delta-nabla…

We consider the problem of approximation of density functions which is important in the theory of pricing of basket options. Our method is well adopted to the multidimensional case. Observe that implementations of polynomial and spline…

We price European options in a class of models in which the volatility of the underlying risky asset depends on the short rate of interest. Our study results in an explicit pricing formula that depends on knowledge of a characteristic…

In this paper, an integral equation representation for the early exercise boundary of an American option contract is considered. Thus far, a number of different techniques have been proposed in the literature to obtain a variety of integral…

In this paper, we consider option pricing in a framework of the fractional Heston-type model with $H>1/2$. As it is impossible to obtain an explicit formula for the expectation $\mathbb E f(S_T)$ in this case, where $S_T$ is the asset price…

We provided an analytical representation of the price of a barrier option with one type of special moving barrier. We consider the case that risk free rate, dividend rate and stock volatility are time dependent. We get a pricing formula and…

In this paper, we consider pricing of European options and spread options for Hawkes-based model for the limit order book. We introduce multivariate Hawkes process and the multivariable general compound Hawkes process. Exponential…

This paper studies the problem of option replication in general stochastic volatility markets with transaction costs, using a new specification for the volatility adjustment in Leland's algorithm \cite{Leland}. We prove several limit…

We study the optimal portfolio liquidation problem over a finite horizon in a limit order book with bid-ask spread and temporary market price impact penalizing speedy execution trades. We use a continuous-time modeling framework, but in…

This paper shows how reinforcement learning can be used to derive optimal hedging strategies for derivatives when there are transaction costs. The paper illustrates the approach by showing the difference between using delta hedging and…

In this paper, we describe a novel agent-based approach for modelling the transaction cost of buying or selling an asset in financial markets, e.g., to liquidate a large position as a result of a margin call to meet financial obligations.…

Pricing financial derivatives, in particular European-style options at different time-maturities and strikes, means a relevant problem in finance. The dynamics describing the price of vanilla options when constant volatilities and interest…

We consider dynamic sublinear expectations (i.e., time-consistent coherent risk measures) whose scenario sets consist of singular measures corresponding to a general form of volatility uncertainty. We derive a c\`adl\`ag nonlinear…