Related papers: Path Integral Method for Pricing Proportional Step…
We determine the price of digital double barrier options with an arbitrary number of barrier periods in the Black-Scholes model. This means that the barriers are active during some time intervals, but are switched off in between. As an…
We present a parallel algorithm that computes the ask and bid prices of an American option when proportional transaction costs apply to the trading of the underlying asset. The algorithm computes the prices on recombining binomial trees,…
We develop a non-perturbative method for calculating partition functions of strongly coupled quantum mechanical systems with interactions between subsystems described by a path integral of a dual system. The dual path integral is derived…
In this paper we present a very simple way to price a class of barrier options when the underlying process is driven by a huge class of L\'evy processes. To achieve our goal we assume that our market satisfies a symmetry property. In case…
These lectures are intended as an introduction to the technique of path integrals and their applications in physics. The audience is mainly first-year graduate students, and it is assumed that the reader has a good foundation in quantum…
We give a pragmatic/pedagogical discussion of using Euclidean path integral in asset pricing. We then illustrate the path integral approach on short-rate models. By understanding the change of path integral measure in the Vasicek/Hull-White…
We discuss two numerical methods, based on a path integral approach described in a previous paper (I), for solving the stochastic equations underlying the financial markets: the Monte Carlo approach, and the Green function deterministic…
As is known, an option price is a solution to a certain partial differential equation (PDE) with terminal conditions (payoff functions). There is a close association between the solution of PDE and the solution of a backward stochastic…
Discrete-time quantum walk in one-dimension is studied from a path-integral perspective. This enables derivation of a closed-form expression for amplitudes corresponding to any coin-position basis of the state vector of the quantum walker…
We introduce a new method to price American options based on Chebyshev interpolation. In each step of a dynamic programming time-stepping we approximate the value function with Chebyshev polynomials. The key advantage of this approach is…
In this paper we reformulate the problem of pricing options in a quantum setting. Our proposed algorithm involves preparing an initial state, representing the option price, and then evolving it using existing imaginary time simulation…
It is well known that the Black-Scholes-Merton model suffers from several deficiencies. Jump-diffusion and Levy models have been widely used to partially alleviate some of the biases inherent in this classical model. Unfortunately, the…
Introduced in the late 90s, the passport option gives its holder the right to trade in a market and receive any positive gain in the resulting traded account at maturity. Pricing the option amounts to solving a stochastic control problem…
The use of variational method in functional integral approach is discussed for fermion and boson systems with Coulomb interaction. The formal general expression of thermodynamic potential is obtained by Feynman path integral technique and…
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 introduce two new integral transforms of the quantum mechanical transition kernel that represent physical information about the path integral. These transforms can be interpreted as probability distributions on particle trajectories…
This paper presents an analytical treatment of the path integral formalism for time-dependent quantum systems within the framework of Wigner-Dunkl mechanics, emphasizing systems with varying masses and time-dependent potentials. By…
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…
Pricing of financial derivatives, in particular early exercisable options such as Bermudan options, is an important but heavy numerical task in financial institutions, and its speed-up will provide a large business impact. Recently,…
This paper presents a novel and direct approach to price boundary and final-value problems, corresponding to barrier options, using forward deep learning to solve forward-backward stochastic differential equations (FBSDEs). Barrier…