Related papers: Approximate option pricing formula for Barndorff-N…

A computational technique borrowed from the physical sciences is introduced to obtain accurate closed-form approximations for the transition probability of arbitrary diffusion processes. Within the path integral framework the same technique…

The variance gamma model is a widely popular model for option pricing in both academia and industry. In this paper, we provide a new perspective for pricing European style options for the variance gamma model by deriving closed-form…

The purpose of the present notes is to examine the following issues related to the the Chernoff estimate: (1) For contractions on a Banach space we modify the $\sqrt{n}$-estimate and apply it in the proof of the Chernoff product formula for…

The problem of pricing Bermudan options using Monte Carlo and a nonparametric regression is considered. We derive optimal non-asymptotic bounds for a lower biased estimate based on the suboptimal stopping rule constructed using some…

We consider the approximation scheme of the American call option via the discrete Morse semiflow. It is the minimizing scheme of a time-semidiscretized variational functional. In this paper we obtain a rate of convergence of approximate…

Semi-analytical pricing of American options in a time-dependent Ornstein-Uhlenbeck model was presented in [Carr, Itkin, 2020]. It was shown that to obtain these prices one needs to solve (numerically) a nonlinear Volterra integral equation…

Option contracts can be valued by using the Black-Scholes equation, a partial differential equation with initial conditions. An exact solution for European style options is known. The computation time and the error need to be minimized…

The concept of near resonances for harmonic approximations of semiclassical Schr\"odinger operators is introduced and explored. Combined with a natural extension of the Birkhoff-Gustavson normal form, we obtain formulas for approaching the…

A stochastic model for pure-jump diffusion (the compound renewal process) can be used as a zero-order approximation and as a phenomenological description of tick-by-tick price fluctuations. This leads to an exact and explicit general…

We introduce a new class of neural networks designed to be convex functions of their inputs, leveraging the principle that any convex function can be represented as the supremum of the affine functions it dominates. These neural networks,…

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…

In this paper, a standard PDE for the pricing of arithmetic average strike Asian call option is presented. A Crank-Nicolson Implicit Method and a Higher Order Compact finite difference scheme for this pricing problem is derived. Both these…

Given a finite set of European call option prices on a single underlying, we want to know when there is a market model which is consistent with these prices. In contrast to previous studies, we allow models where the underlying trades at a…

In this paper, we study the valuation of American type derivatives in the stochastic volatility model of Barndorff-Nielsen and Shephard (2001). We characterize the value of such derivatives as the unique viscosity solution of an…

Asian option, as one of the path-dependent exotic options, is widely traded in the energy market, either for speculation or hedging. However, it is hard to price, especially the one with the arithmetic average price. The traditional trading…

We analyze the empirical performance of several non-parametric estimators of the pricing functional for European options, using historical put and call prices on the S&P500 during the year 2012. Two main families of estimators are…

In this note, we develop stock option price approximations for a model which takes both the risk o default and the stochastic volatility into account. We also let the intensity of defaults be influenced by the volatility. We show that it…

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…

We derive a new high-order compact finite difference scheme for option pricing in stochastic volatility models. The scheme is fourth-order accurate in space and second-order accurate in time. Under some restrictions, theoretical results…

In this paper, we derive closed-form formulas of first-order approximation for down-and-out barrier and floating strike lookback put option prices under a stochastic volatility model, by using an asymptotic approach. To find the explicit…