Related papers: Floating exercise boundaries for American options …
We study the pricing of European-style options written on forward contracts within function-valued infinite-dimensional affine stochastic volatility models. The dynamics of the underlying forward price curves are modeled within the…
Anomalous diffusions arise as scaling limits of continuous-time random walks (CTRWs) whose innovation times are distributed according to a power law. The impact of a non-exponential waiting time does not vanish with time and leads to…
This paper considers the pricing of long-term options on assets such as housing, where either government intervention or the economic nature of the asset is assumed to limit large falls in prices. The observed asset price is modelled by a…
Perpetual American options are financial instruments that can be readily exercised and do not mature. In this paper we study in detail the problem of pricing this kind of derivatives, for the most popular flavour, within a framework in…
The literature on volatility modelling and option pricing is a large and diverse area due to its importance and applications. This paper provides a review of the most significant volatility models and option pricing methods, beginning with…
A make-your-mind-up option is an American derivative with delivery lags. We show that its put option can be decomposed as a European put and a new type of American-style derivative. The latter is an option for which the investor receives…
This work examines a stochastic volatility model with double-exponential jumps in the context of option pricing. The model has been considered in previous research articles, but no thorough analysis has been conducted to study its quality…
In informationally efficient financial markets, option prices and this implied volatility should immediately be adjusted to new information that arrives along with a jump in underlying's return, whereas gradual changes in implied volatility…
We price European and American exchange options where the underlying asset prices are modelled using a Merton (1976) jump-diffusion with a common Heston (1993) stochastic volatility process. Pricing is performed under an equivalent…
In this paper, we introduce two novel methods to solve the American-style option pricing problem and its dual form at the same time using neural networks. Without applying nested Monte Carlo, the first method uses a series of neural…
Semi-static trading strategies make frequent appearances in mathematical finance, where dynamic trading in a liquid asset is combined with static buy-and-hold positions in options on that asset. We show that the space of outcomes of such…
We present a novel method for the numerical pricing of American options based on Monte Carlo simulation and the optimization of exercise strategies. Previous solutions to this problem either explicitly or implicitly determine so-called…
We study the hedging and valuation of European and American claims on a non-traded asset $Y$, when a traded stock $S$ is available for hedging, with $S$ and $Y$ following correlated geometric Brownian motions. This is an incomplete market,…
In a model with no given probability measure, we consider asset pricing in the presence of frictions and other imperfections and characterize the property of coherent pricing, a notion related to (but much weaker than) the no arbitrage…
We present an algorithm producing a dynamic non-self-financing hedging strategy in an incomplete market corresponding to investor-relevant risk criterion. The optimization is a two stage process that first determines admissible model…
The present article studies geometric step options in exponential L\'evy markets. Our contribution is manifold and extends several aspects of the geometric step option pricing literature. First, we provide symmetry and parity relations and…
Floating offshore structures often exhibit low-frequency oscillatory motions in the horizontal plane, with amplitudes in the same order as their characteristic dimensions and larger than the corresponding wave-frequency responses, making…
If financial markets displayed the informational efficiency postulated in the efficient markets hypothesis (EMH), arbitrage operations would be self-extinguishing. The present paper considers arbitrage sequences in foreign exchange (FX)…
An American option grants the holder the right to select the time at which to exercise the option, so pricing an American option entails solving an optimal stopping problem. Difficulties in applying standard numerical methods to complex…
The paper introduces and studies hedging for game (Israeli) style extension of swing options considered as multiple exercise derivatives. Assuming that the underlying security can be traded without restrictions we derive a formula for…