Related papers: Higher order approximation of option prices in Bar…
We consider closed-form approximations for European put option prices within the Heston and GARCH diffusion stochastic volatility models with time-dependent parameters. Our methodology involves writing the put option price as an expectation…
For the Barndorff-Nielsen and Shephard model, we present approximate expressions of call option prices based on the decomposition formula developed by Arai (2021). Besides, some numerical experiments are also implemented to make sure how…
We consider a discrete-time approximation of paths of an Ornstein--Uhlenbeck process as a mean for estimation of a price of European call option in the model of financial market with stochastic volatility. The Euler--Maruyama approximation…
We establish an explicit approximation formula for European put option prices within a general stochastic volatility model with time-dependent parameters. Our methodology is based on expansions of the mixing representation of the put option…
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…
This paper aims to develop a supervised deep-learning scheme to compute call option prices for the Barndorff-Nielsen and Shephard model with a non-martingale asset price process having infinite active jumps. In our deep learning scheme,…
In this paper we consider the pricing of options on interest rates such as caplets and swaptions in the L\'evy Libor model developed by Eberlein and \"Ozkan (2005). This model is an extension to L\'evy driving processes of the classical…
In this paper we propose a closed-form approximation for the price of basket options under a multivariate Black-Scholes model, based on Taylor expansions and the calculation of mixed exponential-power moments of a Gaussian distribution. Our…
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 the present paper, a decomposition formula for the call price due to Al\`{o}s is transformed into a Taylor type formula containing an infinite series with stochastic terms. The new decomposition may be considered as an alternative to the…
We provide a complete representation of the interest rate in the extended CIR model. Since it was proved in Maghsoodi (1996) that the representation of the CIR process as a sum of squares of independent Ornstein-Uhlenbeck processes is…
We consider the problem of option pricing under stochastic volatility models, focusing on the linear approximation of the two processes known as exponential Ornstein-Uhlenbeck and Stein-Stein. Indeed, we show they admit the same limit…
The present article provides an efficient and accurate hybrid method to price American standard options in certain jump-diffusion models as well as American barrier-type options under the Black & Scholes framework. Our method generalizes…
We consider the pricing problem related to payoffs that can have discontinuities of polynomial growth. The asset price dynamic is modeled within the Black and Scholes framework characterized by a stochastic volatility term driven by a…
We present an approach for pricing European call options in presence of proportional transaction costs, when the stock price follows a general exponential L\'{e}vy process. The model is a generalization of the celebrated work of Davis,…
Here we develop an option pricing method based on Legendre series expansion of the density function. The key insight, relying on the close relation of the characteristic function with the series coefficients, allows to recover the density…
Using classical Taylor series techniques, we develop a unified approach to pricing and implied volatility for European-style options in a general local-stochastic volatility setting. Our price approximations require only a normal CDF and…
Using spectral decomposition techniques and singular perturbation theory, we develop a systematic method to approximate the prices of a variety of options in a fast mean-reverting stochastic volatility setting. Four examples are provided in…
Pricing of high-dimensional options is one of the most important problems in Mathematical Finance. The objective of this manuscript is to present an original self-contained treatment of the multidimensional pricing. During the past decades…
In this paper we study the pricing of exchange options when underlying assets have stochastic volatility and stochastic correlation. An approximation using a closed-form approximation based on a Taylor expansion of the conditional price is…