Related papers: A Numerical Approach to Pricing Exchange Options u…
Developments in finance industry and academic research has led to innovative financial products. This paper presents an alternative approach to price American options. Our approach utilizes famous \cite{heath1992bond} ("HJM") technique to…
In this paper we propose an efficient method to compute the price of multi-asset American options, based on Machine Learning, Monte Carlo simulations and variance reduction technique. Specifically, the options we consider are written on a…
We propose Monte Carlo calibration algorithms for three models: local volatility with stochastic interest rates, stochastic local volatility with deterministic interest rates, and finally stochastic local volatility with stochastic interest…
Pricing of high-dimensional options is one of the most important problems in Mathematical Finance. The objective of this manuscript is to present an original self-contained treatment of the multidimensional pricing. During the past decades…
Volatility modelling has become a significant area of research within Financial Mathematics. Wiener process driven stochastic volatility models have become popular due their consistency with theoretical arguments and empirical observations.…
We study the pricing and hedging of European spread options on correlated assets when, in contrast to the standard framework and consistent with imperfect liquidity markets, the trading in the stock market has a direct impact on stocks…
The pricing and hedging of a general class of options (including American, Bermudan and European options) on multiple assets are studied in the context of currency markets where trading is subject to proportional transaction costs, and…
The aim of this paper is to investigate the use of close formula approximation for pricing European mortgage options. Under the assumption of logistic duration and normal mortgage rates the underlying price at the option expiry is…
In this paper we consider the numerical solution of the two-dimensional time-dependent partial integro-differential complementarity problem (PIDCP) that holds for the value of American-style options under the two-asset Kou jump-diffusion…
Fractional Brownian motion has become a standard tool to address long-range dependence in financial time series. However, a constant memory parameter is too restrictive to address different market conditions. Here we model the price…
This paper mainly discusses the American option's hedging strategies via binomialmodel and the basic idea of pricing and hedging American option. Although the essential scheme of hedging is almost the same as European option, small…
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…
In this paper we analyze American style of floating strike Asian call options belonging to the class of financial derivatives whose payoff diagram depends not only on the underlying asset price but also on the path average of underlying…
Stochastic differential equation (SDE) models are the foundation for pricing and hedging financial derivatives. The drift and volatility functions in SDE models are typically chosen to be algebraic functions with a small number (less than…
In this paper, we study the option pricing problems for rough volatility models. As the framework is non-Markovian, the value function for a European option is not deterministic; rather, it is random and satisfies a backward stochastic…
We consider the problem of pricing American Exchange options driven by a L\'evy process. We study the properties of American Exchange options, we represented it as the sum of the price of the corresponding European exchange option price and…
The article is devoted to models of financial markets with stochastic volatility, which is defined by a functional of Ornstein-Uhlenbeck process or Cox-Ingersoll-Ross process. We study the question of exact price of European option. The…
When trading American and Asian options in the FX derivatives market, banks must calculate prices using a complex mathematical model. It is often observed that different models produce varying prices for the same exotic option, which…
The problem of determining the European-style option price in the incomplete market has been examined within the framework of stochastic optimization. An analytic method based on the discrete dynamic programming equation (Bellman equation)…
We consider the problem of finding model-independent bounds on the price of an Asian option, when the call prices at the maturity date of the option are known. Our methods differ from most approaches to model-independent pricing in that we…