Related papers: Option Pricing for the Variance Gamma Model: A New…
An analytic method for pricing American call options is provided; followed by an empirical method for pricing Asian call options. The methodology is the pricing theory presented in "A Modern Theory of Random Variation", by Patrick…
In this work we propose a option pricing model based on the Ornstein-Uhlenbeck process. It is a new look at the Black-Scholes formula which is based on the quantum game theory. We show the differences between a classical look which is price…
In this article, we employ physics-informed residual learning (PIRL) and propose a pricing method for European options under a regime-switching framework, where closed-form solutions are not available. We demonstrate that the proposed…
The research presented in this article provides an alternative option pricing approach for a class of rough fractional stochastic volatility models. These models are increasingly popular between academics and practitioners due to their…
A statistical decision problem is hidden in the core of option pricing. A simple form for the price C of a European call option is obtained via the minimum Bayes risk, R_B, of a 2-parameter estimation problem, thus justifying calling C…
This paper explores the application of Machine Learning techniques for pricing high-dimensional options within the framework of the Uncertain Volatility Model (UVM). The UVM is a robust framework that accounts for the inherent…
The aim of this paper is to investigate the use of close formula approximation for pricing European mortgage options. Under the assumption of logistic duration and normal mortgage rates the underlying price at the option expiry is…
In this paper we propose a novel dual regression-based approach for pricing American options. This approach reduces the complexity of the nested Monte Carlo method and has especially simple form for time discretised diffusion processes. We…
This paper proposes to model asset price dynamics with a mixture of diffusion processes where the instantaneous volatility of the underlying diffusion process contains a random vector. The marginal probability distributions of the proposed…
In this paper, we investigate a numerical algorithm for the pricing of swing options, relying on the so-called optimal quantization method. The numerical procedure is described in details and numerous simulations are provided to assert its…
We investigate the pricing of financial options under the 2-hypergeometric stochastic volatility model. This is an analytically tractable model that reproduces the volatility smile and skew effects observed in empirical market data. Using a…
We present an adaptive approach for valuing the European call option on assets with stochastic volatility. The essential feature of the method is a reduction of uncertainty in latent volatility due to a Bayesian learning procedure. Starting…
Accurate option pricing is essential for effective trading and risk management in financial markets, yet it remains challenging due to market volatility and the limitations of traditional models like Black-Scholes. In this paper, we…
This review presents the set of electricity price models proposed in the literature since the opening of power markets. We focus on price models applied to financial pricing and risk management. We classify these models according to their…
We present a discrete time stochastic volatility model in which the conditional distribution of the logreturns is a Variance-Gamma, that is a normal variance-mean mixture with Gamma mixing density. We assume that the Gamma mixing density is…
Our goal is to analyze the system of Hamilton-Jacobi-Bellman equations arising in derivative securities pricing models. The European style of an option price is constructed as a difference of the certainty equivalents to the value functions…
In this article, we study the rate of convergence of prices when a model is approximated by some simplified model. We also provide a method how explicit error formula for more general options can be obtained if such formula is available for…
This paper presents closed-form analytical formulas for pricing volatility and variance derivatives with nonlinear payoffs under discrete-time observations. The analysis is based on a probabilistic approach assuming that the underlying…
After a brief review of option pricing theory, we introduce various methods proposed for extracting the statistical information implicit in options prices. We discuss the advantages and drawbacks of each method, the interpretation of their…
We provide a lean, non-technical exposition on the pricing of path-dependent and European-style derivatives in the Cox-Ross-Rubinstein (CRR) pricing model. The main tool used in the paper for cleaning up the reasoning is applying static…