Related papers: An Efficient Unified Approach for Spread Option Pr…
Geometric Asian options are a type of options where the payoff depends on the geometric mean of the underlying asset over a certain period of time. This paper is concerned with the pricing of such options for the class of Volterra-Heston…
This paper develops a novel analytically tractable Neumann series of Bessel functions representation for pricing (and hedging) European-style double barrier knock-out options, which can be applied to the whole class of one-dimensional…
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…
We present a numerical method for the frequent pricing of financial derivatives that depends on a large number of variables. The method is based on the construction of a polynomial basis to interpolate the value function of the problem by…
This article aims to discuss some basics in field of credit modeling, specifically the pricing issue of FtD contract. We demonstrate how the popular copula approach is used in pricing FtD contract, and give a stimulation example of such…
In a seminal paper in 1973, Black and Scholes argued how expected distributions of stock prices can be used to price options. Their model assumed a directed random motion for the returns and consequently a lognormal distribution of asset…
Parametric conditional copula models allow the copula parameters to vary with a set of covariates according to an unknown calibration function. Flexible Bayesian inference for the calibration function of a bivariate conditional copula is…
Contrary to the common view that exact pricing is prohibitive owing to the curse of dimensionality, this study proposes an efficient and unified method for pricing options under multivariate Black-Scholes-Merton (BSM) models, such as the…
We propose a convolution-FFT method for pricing European options under the Heston model that leverages a continuously differentiable representation of the joint characteristic function. Unlike existing Fourier-based methods that rely on…
We suggest an intermediate currency approach that allows us to price options on all FX markets simultaneously under the same risk-neutral measure which ensures consistency of FX option prices across all markets. In particular, it is…
Robust, or model-independent properties of the variance swap are well-known, and date back to Dupire and Neuberger, who showed that, given the price of co-terminal call options, the price of a variance swap was exactly specified under the…
We show how Adjoint Algorithmic Differentiation (AAD) allows an extremely efficient calculation of correlation Risk of option prices computed with Monte Carlo simulations. A key point in the construction is the use of binning to…
The pricing of currency options is largely dependent on the dynamic relationship between a pair of currencies. Typically, the pricing of options with payoffs dependent on multi-assets becomes tricky for reasons such as the non-Gaussian…
In this paper a simple, effective adaptation of Alternating Direction Implicit (ADI) time discretization schemes is proposed for the numerical pricing of American-style options under the Heston model via a partial differential…
We derive analytic series representations for European option prices in polynomial stochastic volatility models. This includes the Jacobi, Heston, Stein-Stein, and Hull-White models, for which we provide numerical case studies. We find that…
A bivariate integer-valued autoregressive process of order 1 (BINAR(1)) with copula-joint innovations is studied. Different parameter estimation methods are analyzed and compared via Monte Carlo simulations with emphasis on estimation of…
We describe a model for evolving commodity forward prices that incorporates three important dynamics which appear in many commodity markets: mean reversion in spot prices and the resulting Samuelson effect on volatility term structure,…
In this work we present an analytical model, based on the path-integral formalism of Statistical Mechanics, for pricing options using first-passage time problems involving both fixed and deterministically moving absorbing barriers under…
High performance computing (HPC) is a very attractive and relatively new area of research, which gives promising results in many applications. In this paper HPC is used for pricing of American options. Although the American options are very…
Multivariate volatility modeling and forecasting are crucial in financial economics. This paper develops a copula-based approach to model and forecast realized volatility matrices. The proposed copula-based time series models can capture…