Related papers: European Option Pricing Under Generalized Tempered…
In the present work, we propose a new multifactor stochastic volatility model in which slow factor of volatility is approximated by a parabolic arc. We retain ourselves to the perturbation technique to obtain approximate expression for…
We study the pricing and hedging of European spread options on correlated assets when, in contrast to the standard framework and consistent with imperfect liquidity markets, the trading in the stock market has a direct impact on stocks…
Researchers have been using Neural Networks and other related machine-learning techniques to price options since the early 1990s. After three decades of improvements in machine learning techniques, computational processing power, cloud…
We apply rough-path theory to study the discrete-time gamma-hedging strategy. We show that if a trader knows that the market price of a set of European options will be given by a diffusive pricing model, then the discrete-time gamma-hedging…
In a seminal paper in 1973, Black and Scholes argued how expected distributions of stock prices can be used to price options. Their model assumed a directed random motion for the returns and consequently a lognormal distribution of asset…
This paper introduces a semi-analytical method for pricing American options on assets (stocks, ETFs) that pay discrete and/or continuous dividends. The problem is notoriously complex because discrete dividends create abrupt price drops and…
We extend the application of the Cherny-Shiryaev-Yor invariance principle to a unified Bachelier-Black-Scholes-Merton (BBSM) dynamic pricing model. This extension incorporates the influence of the history of the dynamics (i.e., the path…
We propose a novel Black-Scholes model under which the stock price processes are modeled by stochastic differential equations driven by sub-diffusions. The new framework can capture the less financial activity phenomenon during the bear…
This paper measures price differences between Hegic option quotes on Arbitrum and a model-based benchmark built on Black--Scholes model with regime-sensitive volatility estimated via a two-regime MS-AR-(GJR)-GARCH model. Using option-level…
We provide an European option pricing formula written in the form of an infinite series of Black Scholes type terms under double Levy jumps model, where both the interest rate and underlying price are driven by Levy process. The series…
This paper presents the solution to a European option pricing problem by considering a regime-switching jump diffusion model of the underlying financial asset price dynamics. The regimes are assumed to be the results of an observed pure…
We develop a novel deep learning approach for pricing European options in diffusion models, that can efficiently handle high-dimensional problems resulting from Markovian approximations of rough volatility models. The option pricing partial…
We derive the stochastic price process for tokens whose sole price discovery mechanism is a constant-product automated market maker (AMM). When the net flow into the pool follows a diffusion, the token price follows a constant elasticity of…
We consider approximate pricing formulas for European options based on approximating the logarithmic return's density of the underlying by a linear combination of rescaled Hermite polynomials. The resulting models, that can be seen as…
In this paper we analyze a nonlinear Black--Scholes model for option pricing under variable transaction costs. The diffusion coefficient of the nonlinear parabolic equation for the price $V$ is assumed to be a function of the underlying…
We consider arbitrage free valuation of European options in Black-Scholes and Merton markets, where the general structure of the market is known, however the specific parameters are not known. In order to reflect this subjective uncertainty…
Here we develop an option pricing method based on Legendre series expansion of the density function. The key insight, relying on the close relation of the characteristic function with the series coefficients, allows to recover the density…
The author presents alternatives to the Black-Scholes european call option pricing model by incorporating different transaction cost structures in the replicating strategy. In particular, an exponentially decreasing structure is proposed…
A new method is proposed to obtain the risk neutral probability of share prices without stochastic calculus and price modeling, via an embedding of the price return modeling problem in Le Cam's statistical experiments framework.…
The objective of this paper is to introduce the theory of option pricing for markets with informed traders within the framework of dynamic asset pricing theory. We introduce new models for option pricing for informed traders in complete…