Related papers: Alternatives to classical option pricing

Advertising options have been recently studied as a special type of guaranteed contracts in online advertising, which are an alternative sales mechanism to real-time auctions. An advertising option is a contract which gives its buyer a…

In this article we present a new approach to the numerical valuation of derivative securities. The method is based on our previous work where we formulated the theory of pricing in terms of tradables. The basic idea is to fit a finite…

There exist several methods how more general options can be priced with call prices. In this article, we extend these results to cover a wider class of options and market models. In particular, we introduce a new pricing formula which can…

The author presents alternatives to the Black-Scholes european call option pricing model by incorporating different transaction cost structures in the replicating strategy. In particular, an exponentially decreasing structure is proposed…

The question of pricing and hedging a given contingent claim has a unique solution in a complete market framework. When some incompleteness is introduced, the problem becomes however more difficult. Several approaches have been adopted in…

We present a numerically efficient approach for learning a risk-neutral measure for paths of simulated spot and option prices up to a finite horizon under convex transaction costs and convex trading constraints. This approach can then be…

G-expectation, as a sublinear expectation, provides a powerful framework for modeling uncertainty in financial markets. Motivated by the need for robust valuation under model uncertainty, this work develops a unified risk-neutral valuation…

Model risk measures consequences of choosing a model in a class of possible alternatives. We find analytical and simulated bounds for payoff functions on classes of plausible alternatives of a given discrete model. We measure the impact of…

We consider a two-asset non-linear model of option pricing in an environment where the correlation is not known precisely, but varies between two known values. First we discuss the non-negativity of the solution of the equation. Next, we…

We consider a multi-asset incomplete model of the financial market, where each of $m\geq 2$ risky assets follows the binomial dynamics, and no assumptions are made on the joint distribution of the risky asset price processes. We provide…

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…

We investigate financial markets under model risk caused by uncertain volatilities. For this purpose we consider a financial market that features volatility uncertainty. To have a mathematical consistent framework we use the notion of…

We analyze the relative price change of assets starting from basic supply/demand considerations subject to arbitrary motivations. The resulting stochastic differential equation has coefficients that are functions of supply and demand. We…

Recent progress in the development of efficient computational algorithms to price financial derivatives is summarized. A first algorithm is based on a path integral approach to option pricing, while a second algorithm makes use of a neural…

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,…

Value adjustment of uncollateralized trades is determined within a risk-neutral pricing framework. When hedging such trades, investors cannot freely trade protection on their own name, thus facing an incomplete market. This fact is…

We suggest an intermediate currency approach that allows us to price options on all FX markets simultaneously under the same risk-neutral measure which ensures consistency of FX option prices across all markets. In particular, it is…

We consider as given a discrete time financial market with a risky asset and options written on that asset and determine both the sub- and super-hedging prices of an American option in the model independent framework of ArXiv:1305.6008. We…

We apply the concepts of utility based pricing and hedging of derivatives in stochastic volatility markets and introduce a new class of "reciprocal affine" models for which the indifference price and optimal hedge portfolio for pure…

The pricing and hedging of a general class of options (including American, Bermudan and European options) on multiple assets are studied in the context of currency markets where trading is subject to proportional transaction costs, and…