Related papers: Pricing multivariate european equity option using …
We combine the one-dimensional Monte Carlo simulation and the semi-analytical one-dimensional heat potential method to design an efficient technique for pricing barrier options on assets with correlated stochastic volatility. Our approach…
We study option prices in financial markets where the risky asset prices are modelled by jump diffusions. It was proposed by Schweizer (1996) in a general semimartingale setting, following earlier works by F\"ollmer and Sondermann (1986)…
Portfolio selection in the periodic investment of securities modeled by a multivariate Merton model with dependent jumps is considered. The optimization framework is designed to maximize expected terminal wealth when portfolio risk is…
This paper is concerned with an important issue in finite mixture modelling, the selection of the number of mixing components. We propose a new penalized likelihood method for model selection of finite multivariate Gaussian mixture models.…
We price European and American exchange options where the underlying asset prices are modelled using a Merton (1976) jump-diffusion with a common Heston (1993) stochastic volatility process. Pricing is performed under an equivalent…
We propose a fast and accurate numerical method for pricing European swaptions in multi-factor Gaussian term structure models. Our method can be used to accelerate the calibration of such models to the volatility surface. The pricing of an…
Importance sampling has been known as a powerful tool to reduce the variance of Monte Carlo estimator for rare event simulation. Based on the criterion of minimizing the variance of Monte Carlo estimator within a parametric family, we…
In this paper, the valuation of European and path-dependent options in foreign exchange (FX) markets is considered when the currency exchange rate evolves according to the Heston model combined with the Cox-Ingersoll-Ross dynamics for the…
Count data are omnipresent in many applied fields, often with overdispersion due to an excess of zeroes or extreme values. With mixtures of Poisson distributions representing an elegant and appealing modelling strategy, we focus here on the…
The quanto option is a cross-currency derivative in which the pay-off is given in foreign currency and then converted to domestic currency, through a constant exchange rate, used for the conversion and determined at contract inception.…
This thesis evaluates most of the extreme mixture models and methods that have appended in the literature and implements them in the context of finance and insurance. The paper also reviews and studies extreme value theory, time series,…
We propose a novel distributional regression model for a multivariate response vector based on a copula process over the covariate space. It uses the implicit copula of a Gaussian multivariate regression, which we call a ``regression…
In this paper we derive a efficient Monte Carlo approximation for the price of path-dependent derivatives under the multiscale stochastic volatility models of Fouque \textit{et al}. Using the formulation of this pricing problem under the…
Utility based methods provide a very general theoretically consistent approach to pricing and hedging of securities in incomplete financial markets. Solving problems in the utility based framework typically involves dynamic programming,…
We propose a versatile Monte-Carlo method for pricing and hedging options when the market is incomplete, for an arbitrary risk criterion (chosen here to be the expected shortfall), for a large class of stochastic processes, and in the…
We consider the problem of choosing an optimal portfolio, assuming the asset returns have a Gaussian mixture (GM) distribution, with the objective of maximizing expected exponential utility. In this paper we show that this problem is…
This work investigates the computational burden of pricing binary options in rare event regimes and introduces an adaptation of the adaptive multilevel splitting (AMS) method for financial derivatives. Standard Monte Carlo becomes…
We study the approximation of $\mathbb{E}f(X_T)$ by a Monte Carlo algorithm, where $X$ is the solution of a stochastic differential equation and $f$ is a given function. We introduce a new variance reduction method, which can be viewed as a…
We present an option pricing formula for European options in a stochastic volatility model. In particular, the volatility process is defined using a fractional integral of a diffusion process and both the stock price and the volatility…
There is a vast literature on numerical valuation of exotic options using Monte Carlo, binomial and trinomial trees, and finite difference methods. When transition density of the underlying asset or its moments are known in closed form, it…