Related papers: Robust option pricing with volatility term structu…
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…
The field of portfolio selection is an active research topic, which combines elements and methodologies from various fields, such as optimization, decision analysis, risk management, data science, forecasting, etc. The modeling and…
Non-equilibrium phenomena occur not only in physical world, but also in finance. In this work, stochastic relaxational dynamics (together with path integrals) is applied to option pricing theory. A recently proposed model (by Ilinski et…
Recorded option pricing datasets are not always freely available. Additionally, these datasets often contain numerous prices which are either higher or lower than can reasonably be expected. Various reasons for these unexpected observations…
The problem of identifying the most discriminating features when performing supervised learning has been extensively investigated. In particular, several methods for variable selection in model-based classification have been proposed.…
Option price data are used as inputs for model calibration, risk-neutral density estimation and many other financial applications. The presence of arbitrage in option price data can lead to poor performance or even failure of these tasks,…
In classic robust optimization, it is assumed that a set of possible parameter realizations, the uncertainty set, is modeled in a previous step and part of the input. As recent work has shown, finding the most suitable uncertainty set is in…
We propose a probabilistic framework for pricing derivatives, which acknowledges that information and beliefs are subjective. Market prices can be translated into implied probabilities. In particular, futures imply returns for these implied…
We study the upper and lower bounds for prices of European and American style options with the possibility of an external termination, meaning that the contract may be terminated at some random time. Under the assumption that the underlying…
We construct a statistical indicator for the detection of short-term asset price bubbles based on the information content of bid and ask market quotes for plain vanilla put and call options. Our construction makes use of the martingale…
One of the shortcomings of the Black and Scholes model on option pricing is the assumption that trading of the underlying asset does not affect the price of that asset. This assumption can be fulfilled only in perfectly liquid markets.…
We introduce a local volatility model for the valuation of options on commodity futures by using European vanilla option prices. The corresponding calibration problem is addressed within an online framework, allowing the use of multiple…
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 inflated beta regression model is widely used for modeling continuous proportions with values at the boundaries. Maximum likelihood estimation for these models is well-known for its sensitivity to outliers, which can severely distort…
Unbiased and consistent variance estimators generally do not exist for design-based treatment effect estimators because experimenters never observe more than one potential outcome for any unit. The problem is exacerbated by interference and…
In robust decision-making under non-Bayesian uncertainty, different robust optimization criteria, such as maximin performance, minimax regret, and maximin ratio, have been proposed. In many problems, all three criteria are well-motivated…
Estimating and optimizing Mutual Information (MI) is core to many problems in machine learning; however, bounding MI in high dimensions is challenging. To establish tractable and scalable objectives, recent work has turned to variational…
Perpetual American options are financial instruments that can be readily exercised and do not mature. In this paper we study in detail the problem of pricing this kind of derivatives, for the most popular flavour, within a framework in…
We propose a method to bound the expectation of the supremum of the price process in stochastic volatility models. It can be applied, for example, to the rough Bergomi model, avoiding the need to discuss finiteness of higher moments. Our…
We solve a min-max problem in a robust exploratory mean-variance problem with drift uncertainty in this paper. It is verified that robust investors choose the Sharpe ratio with minimal $L^2$ norm in an admissible set. A reinforcement…