Related papers: Ivancevic Option Pricing Model modulational instab…
We present a numerical method for the frequent pricing of financial derivatives that depends on a large number of variables. The method is based on the construction of a polynomial basis to interpolate the value function of the problem by…
We consider the problem of valuation of American options written on dividend-paying assets whose price dynamics follows a multidimensional exponential Levy model. We carefully examine the relation between the option prices, related partial…
The Chicago Board Options Exchange Volatility Index (VIX) is calculated from SPX options and derivatives of VIX are also traded in market, which leads to the so-called ``consistent modeling" problem. This paper proposes a time-changed…
In this paper we calculate the incremental system production cost associated with a measure of locational power injection uncertainty that can be interpreted as a locational price for tracking power fluctuations. This Locational Price of…
In this paper, a pricing formula for volatility swaps is delivered when the underlying asset follows the stochastic volatility model with jumps and stochastic intensity. By using Feynman-Kac theorem, a partial integral differential equation…
We present an option pricing formula for European options in a stochastic volatility model. In particular, the volatility process is defined using a fractional integral of a diffusion process and both the stock price and the volatility…
In previous works Avellaneda et al. pioneered the pricing and hedging of index options - products highly sensitive to implied volatility and correlation assumptions - with large deviations methods, assuming local volatility dynamics for all…
In this chapter, we consider volatility swap, variance swap and VIX future pricing under different stochastic volatility models and jump diffusion models which are commonly used in financial market. We use convexity correction approximation…
In this article we look at stochastic processes with uncertain parameters, and consider different ways in which information is obtained when carrying out observations. For example we focus on the case of a the random evolution of a traded…
We present a detailed analysis and implementation of a splitting strategy to identify simultaneously the local-volatility surface and the jump-size distribution from quoted European prices. The underlying model consists of a jump-diffusion…
This paper explores the concept of random-time subordination in modelling stock-price dynamics, and We first present results on the Laplace distribution as a Gaussian variance-mixture, in particular a more efficient volatility estimation…
We propose a model to quantify the effect of parameter uncertainty on the option price in the Heston model. More precisely, we present a Hamilton-Jacobi-Bellman framework which allows us to evaluate best and worst case scenarios under an…
This work develops change-point methods for statistics of high-frequency data. The main interest is in the volatility of an It\^{o} semi-martingale, the latter being discretely observed over a fixed time horizon. We construct a…
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 derive high-order compact finite difference schemes for option pricing in stochastic volatility models on non-uniform grids. The schemes are fourth-order accurate in space and second-order accurate in time for vanishing correlation. In…
Based on the existing literature, this article presents the different ways of choosing the parameters of stochastic volatility models in general, in the context of pricing financial derivative contracts. This includes the use of stochastic…
We develop a novel deep learning approach for pricing European options in diffusion models, that can efficiently handle high-dimensional problems resulting from Markovian approximations of rough volatility models. The option pricing partial…
The Constant Elasticity of Variance (CEV) model is mathematically presented and then used in a Credit-Equity hybrid framework. Next, we propose extensions to the CEV model with default: firstly by adding a stochastic volatility diffusion…
This paper develops a European option pricing formula for fractional market models. Although there exist option pricing results for a fractional Black-Scholes model, they are established without accounting for stochastic volatility. In this…
The risk-neutral option pricing method under GARCH intensity model is examined. The GARCH intensity model incorporates the characteristics of financial return series such as volatility clustering, leverage effect and conditional asymmetry.…