Related papers: Pricing Quanto and Composite Contracts with Local-…
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…
We present a stochastic local volatility model for derivative contracts on commodity futures. The aim of the model is to be able to recover the prices of derivative claims both on futures contracts and on indices on futures strategies.…
The quanto option is a cross-currency derivative in which the pay-off is given in foreign currency and then converted to domestic currency, through a constant exchange rate, used for the conversion and determined at contract inception.…
Quanto options allow the buyer to exchange the foreign currency payoff into the domestic currency at a fixed exchange rate. We investigate quanto options with multiple underlying assets valued in different foreign currencies each with a…
In the paper, the pricing of Quanto options is studied, where the underlying foreign asset and the exchange rate are correlated with each other. Firstly, we adopt Bayesian methods to estimate unknown parameters entering the pricing formula…
We propose Monte Carlo calibration algorithms for three models: local volatility with stochastic interest rates, stochastic local volatility with deterministic interest rates, and finally stochastic local volatility with stochastic interest…
We study the local volatility function in the Foreign Exchange market where both domestic and foreign interest rates are stochastic. This model is suitable to price long-dated FX derivatives. We derive the local volatility function and…
The pricing of derivatives tied to baskets of assets demands a sophisticated framework that aligns with the available market information to capture the intricate non-linear dependency structure among the assets. We describe the dynamics of…
When trading American and Asian options in the FX derivatives market, banks must calculate prices using a complex mathematical model. It is often observed that different models produce varying prices for the same exotic option, which…
The goal of this paper is to investigate how the marginal and dependence structures of a variety of multivariate L\'evy models affect calibration and pricing. To this aim, we study the approaches of Luciano and Semeraro (2010) and Ballotta…
Most models for barrier pricing are designed to let a market maker tune the model-implied covariance between moves in the asset spot price and moves in the implied volatility skew. This is often implemented with a local…
We develop an expansion approach for the pricing of European quanto options written on LIBOR rates (of a foreign currency). We derive the dynamics of the system of foreign LIBOR rates under the domestic forward measure and then consider the…
We provide a survey of recent results on model calibration by Optimal Transport. We present the general framework and then discuss the calibration of local, and local-stochastic, volatility models to European options, the joint VIX/SPX…
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…
We apply convex regularization techniques to the problem of calibrating the local volatility surface model of Dupire taking into account the practical requirement of discrete grids and noisy data. Such requirements are the consequence of…
After the beginning of the credit and liquidity crisis, financial institutions have been considering creating a convertible-bond type contract focusing on Capital. Under the terms of this contract, a bond is converted into equity if the…
This article presents a generic hybrid numerical method to price a wide range of options on one or several assets, as well as assets with stochastic drift or volatility. In particular for equity and interest rate hybrid with local…
Collateralized debt obligation (CDO) has been one of the most commonly used structured financial products and is intensively studied in quantitative finance. By setting the asset pool into different tranches, it effectively works out and…
We propose a new structural model that can compute the electricity spot and forward prices in two coupled markets with limited interconnection and multiple fuels. We choose a structural approach in order to represent some key…
We explore the possibilities of importance sampling in the Monte Carlo pricing of a structured credit derivative referred to as Collateralized Debt Obligation (CDO). Modeling a CDO contract is challenging, since it depends on a pool of…