Related papers: ESG-valued discrete option pricing in complete mar…

G-expectation, as a sublinear expectation, provides a powerful framework for modeling uncertainty in financial markets. Motivated by the need for robust valuation under model uncertainty, this work develops a unified risk-neutral valuation…

In this article we focus on the pricing of exchange options when the dynamic of logprices follows either the well-known variance gamma or the recent variance gamma++ process introduced in Gardini et al [19]. In particular, for the former…

This paper is devoted to the price-storage dynamics in natural gas markets. A novel stochastic path-dependent volatility model is introduced with path-dependence in both price volatility and storage increments. Model calibrations are…

In incomplete financial markets, pricing and hedging European options lack a unique no-arbitrage solution due to unhedgeable risks. This paper introduces a constrained deep learning approach to determine option prices and hedging strategies…

The recent widespread adoption of rooftop solar backed by battery storage is enabling energy customers to both produce and consume electricity (i.e., prosumers of electricity). To facilitate prosumer participation in the electric grid, new…

The multidimensional Uncertain Volatility Model leads to robust option pricing problems under joint volatility and correlation uncertainty. Their numerical resolution quickly becomes challenging because the associated stochastic control…

In this paper, we propose an iterative splitting method to solve the partial differential equations in option pricing problems. We focus on the Heston stochastic volatility model and the derived two-dimensional partial differential equation…

We present a generative framework for pricing European-style basket options by learning the conditional terminal distribution of the log arithmetic-weighted basket return. A Mixture Density Network (MDN) maps time-varying market inputs…

We consider the problem of option hedging in a market with proportional transaction costs. Since super-replication is very costly in such markets, we replace perfect hedging with an expected loss constraint. Asymptotic analysis for small…

We study the problem of computing the matrix exponential of a block triangular matrix in a peculiar way: Block column by block column, from left to right. The need for such an evaluation scheme arises naturally in the context of option…

This paper mainly discusses the American option's hedging strategies via binomialmodel and the basic idea of pricing and hedging American option. Although the essential scheme of hedging is almost the same as European option, small…

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.…

Refining a discrete model of Cheuk and Vorst we obtain a closed formula for the price of a European lookback option at any time between emission and maturity. We derive an asymptotic expansion of the price as the number of periods tends to…

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…

Option pricing in real markets faces fundamental challenges. The Black--Scholes--Merton (BSM) model assumes constant volatility and uses a linear generator $g(t,x,y,z)=-ry$, while lacking explicit behavioral factors, resulting in systematic…

We develop policy gradients methods for stochastic control with exit time in a model-free setting. We propose two types of algorithms for learning either directly the optimal policy or by learning alternately the value function (critic) and…

We introduce a class of models for multidimensional control problems which we call skip-free Markov decision processes on trees. We describe and analyse an algorithm applicable to Markov decision processes of this type that are skip-free in…

In this paper we propose two efficient techniques which allow one to compute the price of American basket options. In particular, we consider a basket of assets that follow a multi-dimensional Black-Scholes dynamics. The proposed…

This article is the second one in a series on the use of scaling invariance in finance. In the first article (cond-mat/9906048), we introduced a new formalism for the pricing of derivative securities, which focusses on tradable objects…

We propose a projected gradient dynamical system as a model for a bargaining scheme for an asset for which the two interested agents have personal valuations which do not initially coincide. The personal valuations are formed using…