Related papers: A note on closed-form spread option valuation unde…
We study the Option pricing with linear investment strategy based on discrete time trading of the underlying security, which unlike the existing continuous trading models provides a feasible real market implementation. Closed form formulas…
We present closed analytical approximations for the pricing of Asian basket spread options under the Black-Scholes model. The formulae are obtained by using a stochastic Taylor expansion around a log-normal proxy model and are found to be…
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…
Kristensen and Mele (2011) developed a new approach to obtain closed-form approximations to continuous-time derivatives pricing models. The approach uses a power series expansion of the pricing bias between an intractable model and some…
In this paper we study the pricing of exchange options when underlying assets have stochastic volatility and stochastic correlation. An approximation using a closed-form approximation based on a Taylor expansion of the conditional price is…
Options are financial instruments that depend on the underlying stock. We explain their non-Gaussian fluctuations using the nonextensive thermodynamics parameter $q$. A generalized form of the Black-Scholes (B-S) partial differential…
In the present paper, a decomposition formula for the call price due to Al\`{o}s is transformed into a Taylor type formula containing an infinite series with stochastic terms. The new decomposition may be considered as an alternative to the…
We establish an explicit approximation formula for European put option prices within a general stochastic volatility model with time-dependent parameters. Our methodology is based on expansions of the mixing representation of the put option…
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…
We show how the prices of options can be determined with the help of double-fractional differential equation in such a way that their inclusion in a portfolio of stocks provides a more reliable hedge against dramatic price drops that the…
We present an approximation method based on the mixing formula (Hull & White 1987, Romano & Touzi 1997) for pricing European options in Barndorff-Nielsen and Shephard models. This approximation is based on a Taylor expansion of the option…
We consider call option prices in diffusion models close to expiry, in an asymptotic regime ("moderately out of the money") that interpolates between the well-studied cases of at-the-money options and out-of-the-money fixed-strike options.…
Some expansion methods have been proposed for approximately pricing options which has no exact closed formula. Benhamou et al. (2010) presents the smart expansion method that directly expands the expectation value of payoff function with…
In the present paper we construct stock price processes with the same marginal log-normal law as that of a geometric Brownian motion and also with the same transition density (and returns' distributions) between any two instants in a given…
We present closed analytical approximations for the pricing of basket options, also applicable to Asian options with discrete averaging under the Black-Scholes model with time-dependent parameters. The formulae are obtained by using a…
The Black-Scholes model (sometimes known as the Black-Scholes-Merton model) gives a theoretical estimate for the price of European options. The price evolution under this model is described by the Black-Scholes formula, one of the most…
We introduce a novel stochastic volatility model where the squared volatility of the asset return follows a Jacobi process. It contains the Heston model as a limit case. We show that the joint density of any finite sequence of log returns…
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…
In this article we focus on the pricing of exchange options when the dynamic of logprices follows either the well-known variance gamma or the recent variance gamma++ process introduced in Gardini et al [19]. In particular, for the former…
We consider a non-Gaussian option pricing model, into which the underlying log-price is assumed to be driven by an $\alpha$-stable distribution. We remove the a priori divergence of the model by introducing a Mellin regularization for the…