Related papers: American options in time-dependent one-factor mode…
In this paper we study the pricing of exchange options under a dynamic described by stochastic correlation with random jumps. In particular, we consider a Ornstein-Uhlenbeck covariance model with Levy Background Noise Process driven by…
We present the method of moments approach to pricing barrier-type options when the underlying is modelled by a general class of jump diffusions. By general principles the option prices are linked to certain infinite dimensional linear…
We discuss a semi-analytical method for solving SABR-type equations based on path integrals. In this approach, one set of variables is integrated analytically while the second set is integrated numerically via Monte-Carlo. This method,…
In this paper we present two parallel Monte Carlo based algorithms for pricing multi--dimensional Bermudan/American options. First approach relies on computation of the optimal exercise boundary while the second relies on classification of…
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…
We price European and American exchange options where the underlying asset prices are modelled using a Merton (1976) jump-diffusion with a common Heston (1993) stochastic volatility process. Pricing is performed under an equivalent…
This study investigates the application of machine learning algorithms, particularly in the context of pricing American options using Monte Carlo simulations. Traditional models, such as the Black-Scholes-Merton framework, often fail to…
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…
We present a path integral method to derive closed-form solutions for option prices in a stochastic volatility model. The method is explained in detail for the pricing of a plain vanilla option. The flexibility of our approach is…
The matter of the stability for multi-asset American option pricing problems is a present remaining challenge. In this paper a general transformation of variables allows to remove cross derivative terms reducing the stencil of the proposed…
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…
American options are the reference instruments for the model calibration of a large and important class of single stocks. For this task, a fast and accurate pricing algorithm is indispensable. The literature mainly discusses pricing methods…
In the framework of Black-Scholes-Merton model of financial derivatives, a path integral approach to option pricing is presented. A general formula to price European path dependent options on multidimensional assets is obtained and…
The problem of determining the European-style option price in the incomplete market has been examined within the framework of stochastic optimization. An analytic method based on the discrete dynamic programming equation (Bellman equation)…
In this paper, a time substitution as used by Duru and Kleinert in their treatment of the hydrogen atom with path integrals is performed to price timer options under stochastic volatility models. We present general pricing formulas for both…
We propose a numerical method for the valuation of European-style options under two-asset infinite-activity exponential L\'evy models. Our method extends the effective approach developed by Wang, Wan & Forsyth (2007) for the 1-dimensional…
We investigate the problem of pricing derivatives under a fractional stochastic volatility model. We obtain an approximate expression of the derivative price where the stochastic volatility can be composed of deterministic functions of time…
We give an analytical characterization of the price function of an American option in Heston-type models. Our approach is based on variational inequalities and extends recent results of Daskalopoulos and Feehan (2011). We study the…
American options in a multi-asset market model with proportional transaction costs are studied in the case when the holder of an option is able to exercise it gradually at a so-called mixed (randomised) stopping time. The introduction of…
In mathematical finance, a process of calibrating stochastic volatility (SV) option pricing models to real market data involves a numerical calculation of integrals that depend on several model parameters. This optimization task consists of…