Related papers: Exchange option pricing under variance gamma-like …
We present a discrete time stochastic volatility model in which the conditional distribution of the logreturns is a Variance-Gamma, that is a normal variance-mean mixture with Gamma mixing density. We assume that the Gamma mixing density is…
This paper presents closed-form analytical formulas for pricing volatility and variance derivatives with nonlinear payoffs under discrete-time observations. The analysis is based on a probabilistic approach assuming that the underlying…
Spread options are a fundamental class of derivative contract written on multiple assets, and are widely used in a range of financial markets. There is a long history of approximation methods for computing such products, but as yet there is…
We consider option pricing using a discrete-time Markov switching stochastic volatility with co-jump model, which can model volatility clustering and varying mean-reversion speeds of volatility. For pricing European options, we develop a…
We present a path integral method to derive closed-form solutions for option prices in a stochastic volatility model. The method is explained in detail for the pricing of a plain vanilla option. The flexibility of our approach is…
We discuss the pricing and hedging of volatility options in some rough volatility models. First, we develop efficient Monte Carlo methods and asymptotic approximations for computing option prices and hedge ratios in models where…
The literature on volatility modelling and option pricing is a large and diverse area due to its importance and applications. This paper provides a review of the most significant volatility models and option pricing methods, beginning with…
We propose a method for extending a given asset pricing formula to account for two additional sources of risk: the risk associated with future changes in market--calibrated parameters and the remaining risk associated with idiosyncratic…
We model the logarithm of the price (log-price) of a financial asset as a random variable obtained by projecting an operator stable random vector with a scaling index matrix $\underline{\underline{E}}$ onto a non-random vector. The scaling…
We unify and extend a number of approaches related to constructing multivariate Variance-Gamma (V.G.) models for option pricing. An overarching model is derived by subordinating multivariate Brownian motion to a subordinator from the Thorin…
We introduce a new and highly tractable structural model for spot and derivative prices in electricity markets. Using a stochastic model of the bid stack, we translate the demand for power and the prices of generating fuels into electricity…
In this study we consider the pricing of energy derivatives when the evolution of spot prices follows a tempered stable or a CGMY driven Ornstein- Uhlenbeck process. To this end, we first calculate the characteristic function of the…
This paper considers options pricing when the assumption of normality is replaced with that of the symmetry of the underlying distribution. Such a market affords many equivalent martingale measures (EMM). However we argue (as in the…
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…
In the framework of bilateral Gamma stock models we seek for adequate option pricing measures, which have an economic interpretation and allow numerical calculations of option prices. Our investigations encompass Esscher transforms, minimal…
The pricing of options, warrants and other derivative securities is one of the great success of financial economics. These financial products can be modeled and simulated using quantum mechanical instruments based on a Hamiltonian…
We develop a model for indifference pricing in derivatives markets where price quotes have bid-ask spreads and finite quantities. The model quantifies the dependence of the prices and hedging portfolios on an investor's beliefs, risk…
Reliability Options are capacity remuneration mechanisms aimed at enhancing security of supply in electricity systems. They can be framed as call options on electricity sold by power producers to System Operators. This paper provides a…
This paper focus on pricing exchange option based on copulas by MCMC algorithm. Initially, we introduce the methodologies concerned about risk-netural pricing, copulas and MCMC algorithm. After the basic knowledge, we compare the option…
In a stochastic volatility framework, we find a general pricing equation for the class of payoffs depending on the terminal value of a market asset and its final quadratic variation. This allows a pricing tool for European-style claims…