Related papers: Convexity adjustments \`a la Malliavin
We establish an explicit approximation formula for European put option prices within a general stochastic volatility model with time-dependent parameters. Our methodology is based on expansions of the mixing representation of the put option…
In this paper, we present a new method for pricing CMS derivatives. We use Mallaivin's calculus to establish a model-free connection between the price of a CMS derivative and a quadratic payoff. Then, we apply Watanabe's expansions to…
The article is devoted to models of financial markets with stochastic volatility, which is defined by a functional of Ornstein-Uhlenbeck process or Cox-Ingersoll-Ross process. We study the question of exact price of European option. The…
In this paper we derive tractable formulae for price sensitivities of two-dimensional spread options using Malliavin calculus. In particular, we consider spread options with asset dynamics driven by geometric Brownian motion and stochastic…
This study introduces computation of option sensitivities (Greeks) using the Malliavin calculus under the assumption that the underlying asset and interest rate both evolve from a stochastic volatility model and a stochastic interest rate…
Malliavin calculus is a powerful and general framework for the analysis of square-integrable random variables, but it often suffers from a lack of tractability and explicit representations. To address this limitation, we focus on a subclass…
In this article, we give a brief informal introduction to Malliavin Calculus for newcomers. We apply these ideas to the simulation of Greeks in Finance. First to European-type options where formulas can be computed explicitly and therefore…
In the framework of risk management, for the study of the sensitivity of pricing and hedging in stochastic financial models to changes of parameters and to perturbations of the stock prices, we propose an error calculus which is an…
This paper advocates proximal Markov Chain Monte Carlo (ProxMCMC) as a flexible and general Bayesian inference framework for constrained or regularized estimation. Originally introduced in the Bayesian imaging literature, ProxMCMC employs…
Using Malliavin calculus techniques, we derive an analytical formula for the price of European options, for any model including local volatility and Poisson jump process. We show that the accuracy of the formula depends on the smoothness of…
We deal with the calculation of price sensitivities for stochastic volatility models. General forms for the dynamics of the underlying asset price and its volatility are considered. We make use of the chaotic (or Malliavin) calculus to…
Using Malliavin Calculus techniques, we derive closed-form expressions for the at-the-money behaviour of the forward implied volatility, its skew and its curvature, in general Markovian stochastic volatility models with continuous paths.
We present a Fourier-analytic method for estimating convergence rates in total variation distance in terms of various metrics related to weak convergence. Applications are provided in the areas of Malliavin calculus, normal approximation…
We focus on mean-variance hedging problem for models whose asset price follows an exponential additive process. Some representations of mean-variance hedging strategies for jump type models have already been suggested, but none is suited to…
By means of the Malliavin calculus, integral representations for the likelihood function and for the derivative of the log-likelihood function are given for a model based on discrete time observations of the solution to equation…
This paper develops a new efficient scheme for approximations of expectations of the solutions to stochastic differential equations (SDEs). In particular, we present a method for connecting approximate operators based on an asymptotic…
We establish several closed pricing formula for various path-independent payoffs, under an exponential L\'evy model driven by the Variance Gamma process. These formulas take the form of quickly convergent series and are obtained via tools…
The contributions of this paper are twofold: we define and investigate the properties of a short rate model driven by a general Gaussian Volterra process and, after defining precisely a notion of convexity adjustment, derive explicit…
In recent years there has been an advent of quanto options in energy markets. The structure of the payoff is rather a different type from other markets since it is written as a product of an underlying energy index and a measure of…
The computation of Greeks for exponential L\'evy models are usually approached by Malliavin Calculus and other methods, as the Likelihood Ratio and the finite difference method. In this paper we obtain exact formulas for Greeks of European…