Related papers: American options in time-dependent one-factor mode…
In this paper, we introduce two novel methods to solve the American-style option pricing problem and its dual form at the same time using neural networks. Without applying nested Monte Carlo, the first method uses a series of neural…
An efficient computational algorithm to price financial derivatives is presented. It is based on a path integral formulation of the pricing problem. It is shown how the path integral approach can be worked out in order to obtain fast and…
In this paper we investigate a nonlinear generalization of the Black-Scholes equation for pricing American style call options in which the volatility term may depend on the underlying asset price and the Gamma of the option. We propose a…
Pricing of European basket call option with n-assets and a bond is discussed in this paper, where all prices of n-assets and the bond are driven by Exponential Ornstein-Uhlenbeck processes. The close-form of European basket option pricing…
We develop a theory for option pricing with perfect hedging in an inefficient market model where the underlying price variations are autocorrelated over a time tau. This is accomplished by assuming that the underlying noise in the system is…
European options can be priced by solving parabolic partial(-integro) differential equations under stochastic volatility and jump-diffusion models like Heston, Merton, and Bates models. American option prices can be obtained by solving…
We propose a multi-scale stochastic volatility model in which a fast mean-reverting factor of volatility is built on top of the Heston stochastic volatility model. A singular pertubative expansion is then used to obtain an approximation for…
Analytical pricing formulas and Greeks are obtained for European and American basket put options using Mellin transforms. We assume assets are driven by geometric Brownian motion which exhibit correlation and pay a continuous dividend rate.…
In this paper new analytical and numerical approaches to valuating path-dependent options of European type have been developed. The model of stochastic volatility as a basic model has been chosen. For European options we could improve the…
In this paper, we propose an iterative splitting method to solve the partial differential equations in option pricing problems. We focus on the Heston stochastic volatility model and the derived two-dimensional partial differential equation…
Assuming that price of the underlying stock is moving in range bound, the Black-Scholes formula for options pricing supports a separation of variables. The resulting time-independent equation is solved employing different behavior of the…
This paper addresses an important gap in rigorous numerical treatments for pricing American options under correlated two-asset jump-diffusion models using the viscosity solution framework, with a particular focus on the Merton model. The…
In this paper, we propose a semi-analytical approach to pricing options on SOFR futures where the underlying SOFR follows a time-dependent CEV model. By definition, these options change their type at the beginning of the reference period:…
American options are studied in a general discrete market in the presence of proportional transaction costs, modelled as bid-ask spreads. Pricing algorithms and constructions of hedging strategies, stopping times and martingale…
In this paper I develop a new computational method for pricing path dependent options. Using the path integral representation of the option price, I show that in general it is possible to perform analytically a partial averaging over the…
The paper focuses on pricing European-style options on several underlying assets under the Black-Scholes model represented by a nonstationary partial differential equation. The proposed method combines the Galerkin method with…
In this article we consider the problem of pricing and hedging high-dimensional Asian basket options by Quasi-Monte Carlo simulation. We assume a Black-Scholes market with time-dependent volatilities and show how to compute the deltas by…
Characterization of the American put option price is still an open issue. From the beginning of the nineties there exists a non-closed formula for this price but nontrivial numerical computations are required to solve it. Strong efforts…
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…
A one-factor asset pricing model with an Ornstein--Uhlenbeck process as its state variable is studied under partial information: the mean-reverting level and the mean-reverting speed parameters are modeled as hidden/unobservable stochastic…