Related papers: Fast American Option Pricing using Nonlinear Stenc…
We derive the Black-Scholes-Merton dual equation, which has exactly the same form as the Black-Scholes-Merton equation. The novel and general equation works for options with a payoff of homogeneous of degree one, including European,…
In this paper, we give a new approximate dynamic programming (ADP) method to solve large-scale Markov decision programming (MDP) problem. In comparison with many classic ADP methods which have large number of constraints, we formulate an…
In this article we discuss the problem of calculating optimal model-independent (robust) bounds for the price of Asian options with discrete and continuous averaging. We will give geometric characterisations of the maximising and the…
In this article, a compact finite difference method is proposed for pricing European and American options under jump-diffusion models. Partial integro-differential equation and linear complementary problem governing European and American…
We derive high-order compact finite difference schemes for option pricing in stochastic volatility models on non-uniform grids. The schemes are fourth-order accurate in space and second-order accurate in time for vanishing correlation. In…
Partial differential equation (PDE) solvers underpin modern quantitative finance, governing option pricing and risk evaluation. Physics-Informed Neural Networks (PINNs) have emerged as a promising approach for solving the forward and…
An American option grants the holder the right to select the time at which to exercise the option, so pricing an American option entails solving an optimal stopping problem. Difficulties in applying standard numerical methods to complex…
In this paper we introduce a new algorithm for American Monte Carlo that can be used either for American-style options, callable structured products or for computing counterparty credit risk (e.g. CVA or PFE computation). Leveraging least…
In this article we present a new approach to the numerical valuation of derivative securities. The method is based on our previous work where we formulated the theory of pricing in terms of tradables. The basic idea is to fit a finite…
Efficient and fast predictor-corrector methods are proposed to deal with nonlinear Caputo-Fabrizio fractional differential equations, where Caputo-Fabrizio operator is a new proposed fractional derivative with a smooth kernel. The proposed…
We construct an efficient class of increasingly high-order (up to 17th-order) essentially non-oscillatory schemes with multi-resolution (ENO-MR) for solving hyperbolic conservation laws. The candidate stencils for constructing ENO-MR…
Online linear programming (OLP) has found broad applications in revenue management and resource allocation. State-of-the-art OLP algorithms achieve low regret by repeatedly solving linear programming (LP) subproblems that incorporate…
For pricing American options, %after suitable discretization in space and time, a sequence of discrete linear complementarity problems (LCPs) or equivalently Hamilton-Jacobi-Bellman (HJB) equations need to be solved in a sequential…
Higher-order nonlinear time-evolution equations have widespread applications in science and engineering, such as in solid mechanics, materials science, and fluid mechanics. This paper mainly studies a direct time-parallel algorithm for…
We present a differential machine learning method for zero-days-to-expiry (0DTE) options under a stochastic-volatility jump-diffusion model. To handle the ultra-short-maturity regime, we express the option price in Black-Scholes form with a…
In this paper, we demonstrate that policy iteration, introduced in the context of HJB equations in [Forsyth & Labahn, 2007], is an extremely simple generic algorithm for solving linear complementarity problems resulting from the finite…
The Black-Scholes Option pricing model (BSOPM) has long been in use for valuation of equity options to find the prices of stocks. In this work, using BSOPM, we have come up with a comparative analytical approach and numerical technique to…
Based on the analog between the stochastic dynamics and quantum harmonic oscillator, we propose a market force driving model to generalize the Black-Scholes model in finance market. We give new schemes of option pricing, in which we can…
Option contracts can be valued by using the Black-Scholes equation, a partial differential equation with initial conditions. An exact solution for European style options is known. The computation time and the error need to be minimized…
Pricing American options is more complicated than pricing European options, because they can be exercised at any time, and one thus needs to solve a linear complementarity problem instead of simply doing time stepping for computing European…