Related papers: Path-dependent PDEs for volatility derivatives

We extend the viscosity solution characterization proved in [5] for call/put American option prices to the case of a general payoff function in a multi-dimensional setting: the price satisfies a semilinear re-action/diffusion type equation.…

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…

The literature on volatility modelling and option pricing is a large and diverse area due to its importance and applications. This paper provides a review of the most significant volatility models and option pricing methods, beginning with…

In this paper, we propose and study a novel continuous-time model, based on the well-known constant elasticity of variance (CEV) model, to describe the asset price process. The basic idea is that the volatility elasticity of the CEV model…

Stochastic volatility models based on Gaussian processes, like fractional Brownian motion, are able to reproduce important stylized facts of financial markets such as rich autocorrelation structures, persistence and roughness of sample…

In this paper we study the relationship between functional forward-backward stochastic systems and path-dependent PDEs. In the framework of functional It\^o calculus, we introduce a path-dependent PDE and prove that its solution is uniquely…

In February 2018, the VIX index has seen its largest ever increase and has lead to significant losses for some major volatility related products. Despite many efforts, the precise underlying reasons are yet to be discovered. We study the…

In this paper, we study the computation of sensitivities with respect to spot of path dependent financial derivatives by means of path weighting. We propose explicit path weighting formula and variance reduction adjustment in order to…

In this paper, we address the question of the optimal Delta and Vega hedging of a book of exotic options when there are execution costs associated with the trading of vanilla options. In a framework where exotic options are priced using a…

We consider rough differential equations whose coefficients contain path-dependent bounded variation terms and prove the existence and a priori estimate of solutions. These equations include classical path-dependent SDEs containing running…

We develop a variant of rough path theory tailor-made for analyzing a class of financial asset price models known as rough volatility models. As an application, we prove a pathwise large deviation principle (LDP) for a certain class of…

The Heston stochastic volatility model is a standard model for valuing financial derivatives, since it can be calibrated using semi-analytical formulas and captures the most basic structure of the market for financial derivatives with…

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…

This paper includes a proof of well-posedness of an initial-boundary value problem involving a system of degenerate non-local parabolic PDE which naturally arises in the study of derivative pricing in a generalized market model. In a…

This paper is concerned with dynamic user equilibrium with elastic travel demand (E-DUE) when the trip demand matrix is determined endogenously. We present an infinite-dimensional variational inequality (VI) formulation that is equivalent…

We propose a new high-order alternating direction implicit (ADI) finite difference scheme for the solution of initial-boundary value problems of convection-diffusion type with mixed derivatives and non-constant coefficients, as they arise…

In this work we consider one-dimensional generalized affine processes under the paradigm of Knightian uncertainty (so-called non-linear generalized affine models). This extends and generalizes previous results in Fadina et al. (2019) and…

For a class of evolution equations that possibly have only local solutions, we introduce a stochastic component that ensures that the solutions of the corresponding stochastically perturbed equations are global. The class of partial…

Stochastic differential equations (SDEs) are popular tools to analyse time series data in many areas, such as mathematical finance, physics, and biology. They provide a mechanistic description of the phenomeon of interest, and their…

A specific class of explicitly time-dependent potentials is studied by means of path integrals. For this purpose a general formalism to treat explicitly time-dependent space-time transformations in path integrals is sketched. An explicit…