Related papers: Pricing American options under negative rates
We study the short maturity asymptotics for prices of forward start Asian options under the assumption that the underlying asset follows a local volatility model. We obtain asymptotics for the cases of out-of-the-money, in-the-money, and…
In this paper, we present a new method for calculating the limit of early exercise boundary at expiry. We price American style of general derivative using a formula expressed as a sum of the value of European style of derivative and so…
We introduce and discuss a general criterion for the derivative pricing in the general situation of incomplete markets, we refer to it as the No Almost Sure Arbitrage Principle. This approach is based on the theory of optimal strategy in…
The virtue of an American option is that it can be exercised at any time. This right is particularly valuable when there is model uncertainty. Yet almost all the extensive literature on American options assumes away model uncertainty. This…
This work focuses on the indifference pricing of American call option underlying a non-traded stock, which may be partially hedgeable by another traded stock. Under the exponential forward measure, the indifference price is formulated as a…
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 article, a compact finite difference method is proposed for pricing European and American options under jump-diffusion models. Partial integro-differential equation and linear complementary problem governing European and American…
The Area Under the ROC Curve (AUC) is an important model metric for evaluating binary classifiers, and many algorithms have been proposed to optimize AUC approximately. It raises the question of whether the generally insignificant gains…
We introduce a new method to price American options based on Chebyshev interpolation. In each step of a dynamic programming time-stepping we approximate the value function with Chebyshev polynomials. The key advantage of this approach is…
Game (Israeli) options in a multi-asset market model with proportional transaction costs are studied in the case when the buyer is allowed to exercise the option and the seller has the right to cancel the option gradually at a mixed (or…
Existing approaches to asset-pricing under model-uncertainty adapt classical utility-maximization frameworks and seek theoretical comprehensiveness. We move toward practice by considering binary model-risks and by emphasizing 'constraints'…
We consider the sequential decision-making problem where the mean outcome is a non-linear function of the chosen action. Compared with the linear model, two curious phenomena arise in non-linear models: first, in addition to the "learning…
We consider active learning under incentive compatibility constraints. The main application of our results is to economic experiments, in which a learner seeks to infer the parameters of a subject's preferences: for example their attitudes…
In this paper we propose two efficient techniques which allow one to compute the price of American basket options. In particular, we consider a basket of assets that follow a multi-dimensional Black-Scholes dynamics. The proposed…
In this work we consider three problems of the standard market approach to pricing of credit index options: the definition of the index spread is not valid in general, the usually considered payoff leads to a pricing which is not always…
We develop two alternate approaches to arbitrage-free, market-complete, option pricing. The first approach requires no riskless asset. We develop the general framework for this approach and illustrate it with two specific examples. The…
The Black-Scholes option pricing model remains a cornerstone in financial mathematics, yet its application is often challenged by the need for accurate hedging strategies, especially in dynamic market environments. This paper presents a…
In this paper we investigate a nonlinear generalization of the Black-Scholes equation for pricing American style call options in which the volatility term may depend on the underlying asset price and the Gamma of the option. We propose a…
We present a new approximation scheme for the price and exercise policy of American options. The scheme is based on Hermite polynomial expansions of the transition density of the underlying asset dynamics and the early exercise premium…
Most methods for decision-theoretic online learning are based on the Hedge algorithm, which takes a parameter called the learning rate. In most previous analyses the learning rate was carefully tuned to obtain optimal worst-case…