Related papers: Toward an efficient hybrid method for pricing barr…
For option pricing models and heavy-tailed distributions, this study proposes a continuous-time stochastic volatility model based on an arithmetic Brownian motion: a one-parameter extension of the normal stochastic alpha-beta-rho (SABR)…
We study the pricing of European-style options written on forward contracts within function-valued infinite-dimensional affine stochastic volatility models. The dynamics of the underlying forward price curves are modeled within the…
The Black-Scholes formula for pricing options on stocks and other securities has been generalized by Merton and Garman to the case when stock volatility is stochastic. The derivation of the price of a security derivative with stochastic…
We propose a virtual bidding strategy by modeling the price differences between the day-ahead market and the real-time market as Brownian motion with drift, where the drift rate and volatility are functions of meteorological variables. We…
Two novel closed-form formulas for the price of barrier options in stochastic volatility models with zero interest rate and dividend yield but nonzero correlation between the asset and its instantaneous volatility are derived. The first is…
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…
The hybrid Monte Carlo (HMC) algorithm is applied for the Bayesian inference of the stochastic volatility (SV) model. We use the HMC algorithm for the Markov chain Monte Carlo updates of volatility variables of the SV model. First we…
This paper derives a new semi closed-form approximation formula for pricing an up-and-out barrier option under a certain type of stochastic volatility model including SABR model by applying a rigorous asymptotic expansion method developed…
A new computational method for finite-temperature properties of strongly correlated electrons is proposed by extending the variational Monte Carlo method originally developed for the ground state. The method is based on the path integral in…
This paper considers the valuation of a European call option under the Heston stochastic volatility model. We present the asymptotic solution to the option pricing problem in powers of the volatility of variance. Then we introduce the…
For the calibration of the parameters in static and dynamic SABR stochastic volatility models, we propose the application of the GPU technology to the Simulated Annealing global optimization algorithm and to the Monte Carlo simulation. This…
We propose a new Monte Carlo method for efficiently sampling trajectories with fixed initial and final conditions in a system with discrete degrees of freedom. The method can be applied to any stochastic process with local interactions,…
We describe the pricing and hedging of financial options without the use of probability using rough paths. By encoding the volatility of assets in an enhancement of the price trajectory, we give a pathwise presentation of the replication of…
The research presented in this article provides an alternative option pricing approach for a class of rough fractional stochastic volatility models. These models are increasingly popular between academics and practitioners due to their…
We present a novel method for the numerical pricing of American options based on Monte Carlo simulation and the optimization of exercise strategies. Previous solutions to this problem either explicitly or implicitly determine so-called…
We present an adaptive approach for valuing the European call option on assets with stochastic volatility. The essential feature of the method is a reduction of uncertainty in latent volatility due to a Bayesian learning procedure. Starting…
We propose a new Monte Carlo-based estimator for digital options with assets modelled by a stochastic differential equation (SDE). The new estimator is based on repeated path splitting and relies on the correlation of approximate paths of…
In this paper we study the pricing of exchange options under a dynamic described by stochastic correlation with random jumps. In particular, we consider a Ornstein-Uhlenbeck covariance model with Levy Background Noise Process driven by…
This paper develops a new dual approach to compute the hedging portfolio of a Bermudan option and its initial value. It gives a "purely dual" algorithm following the spirit of Rogers (2010) in the sense that it only relies on the dual…
We present a multivariate stochastic volatility model with leverage, which is flexible enough to recapture the individual dynamics as well as the interdependencies between several assets while still being highly analytically tractable.…