Related papers: A General Approach for Lookback Option Pricing und…
We present the method of moments approach to pricing barrier-type options when the underlying is modelled by a general class of jump diffusions. By general principles the option prices are linked to certain infinite dimensional linear…
In this paper we solve the discrete time mean-variance hedging problem when asset returns follow a multivariate autoregressive hidden Markov model. Time dependent volatility and serial dependence are well established properties of financial…
The paper studies sub and super-replication price bounds for contingent claims defined on general trajectory based market models. No prior probabilistic or topological assumptions are placed on the trajectory space, trading is assumed to…
Optimal execution of a portfolio have been a challenging problem for institutional investors. Traders face the trade-off between average trading price and uncertainty, and traditional methods suffer from the curse of dimensionality. Here,…
Using the Donsker-Prokhorov invariance principle we extend the Kim-Stoyanov-Rachev-Fabozzi option pricing model to allow for variably-spaced trading instances, an important consideration for short-sellers of options. Applying the…
The Markov chain Monte Carlo method is a versatile tool in statistical physics to evaluate multi-dimensional integrals numerically. For the method to work effectively, we must consider the following key issues: the choice of ensemble, the…
This paper performs the numerical analysis and the computation of a Spread option in a market with imperfect liquidity. The number of shares traded in the stock market has a direct impact on the stock's price. Thus, we consider a…
Given a batch of human computation tasks, a commonly ignored aspect is how the price (i.e., the reward paid to human workers) of these tasks must be set or varied in order to meet latency or cost constraints. Often, the price is set…
We reconsider the problem of option pricing using historical probability distributions. We first discuss how the risk-minimisation scheme proposed recently is an adequate starting point under the realistic assumption that price increments…
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.…
Recent empirical studies suggest that the volatilities associated with financial time series exhibit short-range correlations. This entails that the volatility process is very rough and its autocorrelation exhibits sharp decay at the…
We consider the problem of bounding mean first passage times for a class of continuous-time Markov chains that captures stochastic interactions between groups of identical agents. The quantitative analysis of such probabilistic population…
We propose a unifying framework for the pricing of debt securities under general time-inhomogeneous short-rate diffusion processes. The pricing of bonds, bond options, callable/putable bonds, and convertible bonds (CBs) is covered. Using…
In this paper we introduce and solve a class of optimal stopping problems of recursive type. In particular, the stopping payoff depends directly on the value function of the problem itself. In a multi-dimensional Markovian setting we show…
We propose a hybrid tree-finite difference method in order to approximate the Heston model. We prove the convergence by embedding the procedure in a bivariate Markov chain and we study the convergence of European and American option prices.…
The instability of the Ivancevic option pricing model is studied through the variational method. We have analytically derived the dispersion relation of the IOPM for both constant volatility and Landau coefficient model and time-dependent…
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…
In this research the technology of complex Markov chains is applied to predict financial time series. The main distinction of complex or high-order Markov Chains and simple first-order ones is the existing of aftereffect or memory. The…
This paper is concerned with the solution of the optimal stopping problem associated to the valuation of Perpetual American options driven by continuous time Markov chains. We introduce a new dynamic approach for the numerical pricing of…
The paper proposes a class of financial market models which are based on inhomogeneous telegraph processes and jump diffusions with alternating volatilities. It is assumed that the jumps occur when the tendencies and volatilities are…