Related papers: Some asymptotics for short maturity Asian options
We solve the problem of super-hedging European or Asian options for discrete-time financial market models where executable prices are uncertain. The risky asset prices are not described by single-valued processes but measurable selections…
The call auction is a widely used trading mechanism, especially during the opening and closing periods of financial markets. In this paper, we study a standard call auction problem where orders are submitted according to Poisson processes,…
We consider estimation of the spot volatility in a stochastic boundary model with one-sided microstructure noise for high-frequency limit order prices. Based on discrete, noisy observations of an It\^o semimartingale with jumps and general…
We consider a process $X_t$, which is observed on a finite time interval $[0,T]$, at discrete times $0,\Delta_n,2\Delta_n,\ldots.$ This process is an It\^{o} semimartingale with stochastic volatility $\sigma_t^2$. Assuming that $X$ has…
This study develops an integrated stochastic modeling framework for pricing short and medium-maturity equity options and assessing interest-rate risk using the Heston (1993), Bates (1996), and CIR (1985) models. We calibrate the Heston…
Anomalous diffusions arise as scaling limits of continuous-time random walks (CTRWs) whose innovation times are distributed according to a power law. The impact of a non-exponential waiting time does not vanish with time and leads to…
European options can be priced by solving parabolic partial(-integro) differential equations under stochastic volatility and jump-diffusion models like Heston, Merton, and Bates models. American option prices can be obtained by solving…
Volatility measures the amplitude of price fluctuations. Despite it is one of the most important quantities in finance, volatility is not directly observable. Here we apply a maximum likelihood method which assumes that price and volatility…
Jump diffusion processes are widely used to model asset prices over time, mainly for their ability to capture complex discontinuous behavior, but inference on the model parameters remains a challenge. Here our goal is posterior inference on…
We present closed analytical approximations for the pricing of basket options, also applicable to Asian options with discrete averaging under the Black-Scholes model with time-dependent parameters. The formulae are obtained by using a…
Central Banks interventions are frequent in response to exogenous events with direct implications on financial market volatility. In this paper, we introduce the Asymmetric Jump Multiplicative Error Model (AJM), which accounts for a…
Jumps and market microstructure noise are stylized features of high-frequency financial data. It is well known that they introduce bias in the estimation of volatility (including integrated and spot volatilities) of assets, and many methods…
The paper introduces a limit version of multiple stopping options such that the holder selects dynamically a weight function that control the distribution of the payments (benefits) over time. In applications for commodities and energy…
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…
Completeness of the eigenfunctions of a quantum mechanical system is crucial for its probability interpretation. By using the method of contour integral we give properly normalized eigenfunctions for both discrete and continuum spectrum of…
This paper addresses an important gap in rigorous numerical treatments for pricing American options under correlated two-asset jump-diffusion models using the viscosity solution framework, with a particular focus on the Merton model. The…
We consider the pricing and hedging of exotic options in a model-independent set-up using \emph{shortfall risk and quantiles}. We assume that the marginal distributions at certain times are given. This is tantamount to calibrating the model…
American options are studied in a general discrete market in the presence of proportional transaction costs, modelled as bid-ask spreads. Pricing algorithms and constructions of hedging strategies, stopping times and martingale…
We derive a series expansion by Hermite polynomials for the price of an arithmetic Asian option. This series requires the computation of moments and correlators of the underlying price process, but for a polynomial jump-diffusion, these are…
We study the asymptotic behaviour of a class of small-noise diffusions driven by fractional Brownian motion, with random starting points. Different scalings allow for different asymptotic properties of the process (small-time and tail…