Related papers: Pricing American options under negative rates
We consider an optimal stopping time problem related with many models found in real options problems. The main goal of this work is to bring for the field of real options, different and more realistic pay-off functions, and negative…
In the context of dealing with financial risk management problems it is desirable to have accurate bounds for option prices in situations when pricing formulae do not exist in the closed form. A unified approach for obtaining upper and…
We consider the L\'evy model of the perpetual American call and put options with a negative discount rate under Poisson observations. Similar to the continuous observation case as in De Donno et al. [24], the stopping region that…
In this research work, an explicit Runge-Kutta-Fehlberg (RKF) time integration with a fourth-order compact finite difference scheme in space and a high order analytical approximation of the optimal exercise boundary is employed for solving…
It is well-known that using delta hedging to hedge financial options is not feasible in practice. Traders often rely on discrete-time hedging strategies based on fixed trading times or fixed trading prices (i.e., trades only occur if the…
This paper presents the Runge-Kutta-Legendre finite difference scheme, allowing for an additional shift in its polynomial representation. A short presentation of the stability region, comparatively to the Runge-Kutta-Chebyshev scheme…
For a given level of accuracy in option prices, the paper considers the problem of deciding when exactly, as one or more of the pricing parameters change, a barrier option degenerates into a simpler type of option. This problem is…
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…
American options are the reference instruments for the model calibration of a large and important class of single stocks. For this task, a fast and accurate pricing algorithm is indispensable. The literature mainly discusses pricing methods…
This article examines arbitrage investment in a mispriced asset when the mispricing follows the Ornstein-Uhlenbeck process and a credit-constrained investor maximizes a generalization of the Kelly criterion. The optimal differentiable and…
We present new numerical schemes for pricing perpetual Bermudan and American options as well as $\alpha$-quantile options. This includes a new direct calculation of the optimal exercise barrier for early-exercise options. Our approach is…
In this work, we propose an algorithm to price American options by directly solving the dual minimization problem introduced by Rogers. Our approach relies on approximating the set of uniformly square integrable martingales by a finite…
We analyze the regularity of the optimal exercise boundary for the American Put option when the underlying asset pays a discrete dividend at a known time $t_d$ during the lifetime of the option. The ex-dividend asset price process is…
Under the assumption of no-arbitrage, the pricing of American and Bermudan options can be casted into optimal stopping problems. We propose a new adaptive simulation based algorithm for the numerical solution of optimal stopping problems in…
This paper investigates analytic properties of American option prices under the finite moment log-stable (FMLS) model. Under this model the price of American options is characterised by the free boundary problem of a fractional partial…
We consider the problem of valuation of American options written on dividend-paying assets whose price dynamics follows a multidimensional exponential Levy model. We carefully examine the relation between the option prices, related partial…
In this paper, we present a reduced basis method for pricing European and American options based on the Black-Scholes and Heston model. To tackle each model numerically, we formulate the problem in terms of a time dependent variational…
An American option grants the holder the right to select the time at which to exercise the option, so pricing an American option entails solving an optimal stopping problem. Difficulties in applying standard numerical methods to complex…
This paper deals with a high-order accurate implicit finite-difference approach to the pricing of barrier options. In this way various types of barrier options are priced, including barrier options paying rebates, and options on…
A statistical decision problem is hidden in the core of option pricing. A simple form for the price C of a European call option is obtained via the minimum Bayes risk, R_B, of a 2-parameter estimation problem, thus justifying calling C…