Related papers: Pricing European Options under Stochastic Volatili…

Most models for barrier pricing are designed to let a market maker tune the model-implied covariance between moves in the asset spot price and moves in the implied volatility skew. This is often implemented with a local…

Most of the empirical studies on stochastic volatility dynamics favor the 3/2 specification over the square-root (CIR) process in the Heston model. In the context of option pricing, the 3/2 stochastic volatility model is reported to be able…

This paper analyses the implementation and calibration of the Heston Stochastic Volatility Model. We first explain how characteristic functions can be used to estimate option prices. Then we consider the implementation of the Heston model,…

This study investigates the short-term asymptotic behavior of the implied volatility surface (IVS), with a particular focus on the at-the-money (ATM) skew and curvature, which are key determinants of the IVS shape and whose are widely…

This paper studies pricing derivatives in an age-dependent semi-Markov modulated market. We consider a financial market where the asset price dynamics follow a regime switching geometric Brownian motion model in which the coefficients…

This paper presents a methodology to introduce time-dependent parameters for a wide family of models preserving their analytic tractability. This family includes hybrid models with stochastic volatility, stochastic interest-rates, jumps and…

Observing prices of European put and call options, we calibrate exponential L\'evy models nonparametrically. We discuss the efficient implementation of the spectral estimation procedures for L\'evy models of finite jump activity as well as…

The variance-gamma (VG) distributions form a four parameter family that includes as special and limiting cases the normal, gamma and Laplace distributions. Some of the numerous applications include financial modelling and approximation on…

A new framework for pricing the European currency option is developed in the case where the spot exchange rate fellows a time-changed fractional Brownian motion. An analytic formula for pricing European foreign currency option is proposed…

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…

In this paper, we introduce an efficient and end-to-end quantum algorithm tailored for computing the Value-at-Risk (VaR) and conditional Value-at-Risk (CVar) for a portfolio of European options. Our focus is on leveraging quantum…

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…

This paper presents a novel approach to stochastic volatility (SV) modeling by utilizing nonparametric techniques that enhance our ability to capture the volatility of financial time series data, with a particular emphasis on the…

In this paper we provide an extensive classification of one and two dimensional diffusion processes which admit an exact solution to the Kolmogorov (and hence Black-Scholes) equation (in terms of hypergeometric functions). By identifying…

The VSTOXX index tracks the expected 30-day volatility of the EURO STOXX 50 equity index. Futures on the VSTOXX index can, therefore, be used to hedge against economic uncertainty. We investigate the effect of trader inventory on the price…

We propose three different data-driven approaches for pricing European-style call options using supervised machine-learning algorithms. These approaches yield models that give a range of fair prices instead of a single price point. The…

Usually, in the Black-Scholes pricing theory the volatility is a positive real parameter. Here we explore what happens if it is allowed to be a complex number. The function for pricing a European option with a complex volatility has…

In this paper we propose a novel pricing-hedging framework for volatility derivatives which simultaneously takes into account rough volatility and volatility jumps. Our model directly targets the instantaneous variance of a risky asset and…

A growing body of literature suggests that heavy tailed distributions represent an adequate model for the observations of log returns of stocks. Motivated by these findings, here we develop a discrete time framework for pricing of European…

It has been recently shown that spot volatilities can be very well modeled by rough stochastic volatility type dynamics. In such models, the log-volatility follows a fractional Brownian motion with Hurst parameter smaller than 1/2. This…