Related papers: Stochastic Calculus for Option Pricing with Convex…
With the rapid advancement of neural networks, methods for option pricing have evolved significantly. This study employs the Black-Scholes-Merton (B-S-M) model, incorporating an additional variable to improve the accuracy of predictions…
It is known from previous work of the authors that non-negative arbitrage free price processes in finance can be described in terms of filtered likelihood processes of statistical experiments and vice versa. The present paper summarizes and…
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…
In this paper we develop numerical pricing methodologies for European style Exchange Options written on a pair of correlated assets, in a market with finite liquidity. In contrast to the standard multi-asset Black-Scholes framework, trading…
The pricing of options, warrants and other derivative securities is one of the great success of financial economics. These financial products can be modeled and simulated using quantum mechanical instruments based on a Hamiltonian…
We investigate the pricing of financial options under the 2-hypergeometric stochastic volatility model. This is an analytically tractable model that reproduces the volatility smile and skew effects observed in empirical market data. Using a…
In the literature on stochastic frontier models until the early 2000s, the joint consideration of spatial and temporal dimensions was often inadequately addressed, if not completely neglected. However, from an evolutionary economics…
This work studies the valuation of currency options in markets suffering from a financial crisis. We consider a European option where the underlying asset is a foreign currency. We assume that the value of the underlying asset is a…
Optimal pricing of European call option is described by linear stochastic differential equation. Trading strategy given by a twin of stochastic variables was integrated w.r.t. Black-Scholes formula to adopt optimal pricing to tarading…
Price determination is a central research topic of revenue management in marketing. The important aspect in pricing is controlling the stochastic behavior of demand, and the previous studies have tackled price optimization problems with…
In this paper, we derive the price of a European call option of an asset following a normal process assuming stochastic volatility. The volatility is assumed to follow the Cox Ingersoll Ross (CIR) process. We then use the fast Fourier…
We consider the large sum of DC (Difference of Convex) functions minimization problem which appear in several different areas, especially in stochastic optimization and machine learning. Two DCA (DC Algorithm) based algorithms are proposed:…
In the option valuation literature, the shortcomings of one factor stochastic volatility models have traditionally been addressed by adding jumps to the stock price process. An alternate approach in the context of option pricing and…
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…
We use the technique of information relaxation to develop a duality-driven iterative approach to obtaining and improving confidence interval estimates for the true value of finite-horizon stochastic dynamic programming problems. We show…
This study investigates enhancing option pricing by extending the Black-Scholes model to include stochastic volatility and interest rate variability within the Partial Differential Equation (PDE). The PDE is solved using the finite…
We consider high-dimensional asset price models that are reduced in their dimension in order to reduce the complexity of the problem or the effect of the curse of dimensionality in the context of option pricing. We apply model order…
Pricing of high-dimensional options is a deep problem of the Theoretical Financial Mathematics. In this article we present a new class of L\'{e}vy driven models of stock markets. In our opinion, any market model should be based on a…
This study provides a consistent and efficient pricing method for both Standard & Poor's 500 Index (SPX) options and the Chicago Board Options Exchange's Volatility Index (VIX) options under a multiscale stochastic volatility model. To…
In the context of stochastic volatility models, we study representation formulas in terms of expectations for the power series' coefficients associated to the call price-function. As in a recent paper by Antonelli and Scarlatti the…