Related papers: Path-dependent option pricing with two-dimensional…
In this paper, we study the option pricing problems for rough volatility models. As the framework is non-Markovian, the value function for a European option is not deterministic; rather, it is random and satisfies a backward stochastic…
We prove asymptotic results for 2-dimensional random matching problems. In particular, we obtain the leading term in the asymptotic expansion of the expected quadratic transportation cost for empirical measures of two samples of independent…
In this paper, the valuation of European and path-dependent options in foreign exchange (FX) markets is considered when the currency exchange rate evolves according to the Heston model combined with the Cox-Ingersoll-Ross dynamics for the…
This paper deals with the efficient numerical solution of the two-dimensional partial integro-differential complementarity problem (PIDCP) that holds for the value of American-style options under the two-asset Merton jump-diffusion model.…
This paper introduces a no-arbitrage, Monte Carlo-free approach to pricing path-dependent interest rate derivatives. The Heath-Jarrow-Morton model gives arbitrage-free contingent claims prices but is infinite-dimensional, making traditional…
A contour integral method recently proposed by Weideman [IMA J. Numer. Anal., to appear] for integrating semi-discrete advection-diffusion PDEs, is extended for application to some of the important equations of mathematical finance. Using…
We introduce a new method to price American-style options on underlying investments governed by stochastic volatility (SV) models. The method does not require the volatility process to be observed. Instead, it exploits the fact that the…
This paper presents a PDE approach as an alternative to Monte Carlo simulations for computing the invariant measure of a white-noise-driven bilinear oscillator with hysteresis. This model is widely used in engineering to represent highly…
This paper explores the use of the multinode Shepard method for the numerical solution of the two-dimensional Black-Scholes equation. The proposed approach integrates a spatial approximation via the multinode Shepard operator with a…
Subdiffusion is a well established phenomenon in physics. In this paper we apply the subdiffusive dynamics to analyze financial markets. We focus on the financial aspect of time fractional diffusion model with moving boundary i.e. American…
An efficient compression technique based on hierarchical tensors for popular option pricing methods is presented. It is shown that the "curse of dimensionality" can be alleviated for the computation of Bermudan option prices with the Monte…
We combine the one-dimensional Monte Carlo simulation and the semi-analytical one-dimensional heat potential method to design an efficient technique for pricing barrier options on assets with correlated stochastic volatility. Our approach…
The method and characteristics of several approaches to the pricing of discretely monitored arithmetic Asian options on stocks with discrete, absolute dividends are described. The contrast between method behaviors for options with an Asian…
In this paper we derive a efficient Monte Carlo approximation for the price of path-dependent derivatives under the multiscale stochastic volatility models of Fouque \textit{et al}. Using the formulation of this pricing problem under the…
This work discusses the numerical aspects of representing the diffusional (condensational) growth in particulate systems such as atmospheric clouds. It focuses on the Eulerian modeling approach, in which the evolution of the particle size…
Recent studies have demonstrated the efficiency of Variational Autoencoders (VAE) to compress high-dimensional implied volatility surfaces into a low dimensional representation. Although this method can be effectively used for pricing…
This paper concerns the numerical solution of the two-dimensional time-dependent partial integro-differential equation (PIDE) that holds for the values of European-style options under the two-asset Kou jump-diffusion model. A main feature…
For valuing European options, a straightforward model is the well-known Black-Scholes formula. Contrary to market reality, this model assumed that interest rate and volatility are constant. To modify the Black-Scholes model, Heston and…
New simulation approaches to evaluating path-dependent options without matrix inversion issues nor Euler bias are evaluated. They employ three main contributions: Stochastic approximation replaces regression in the LSM algorithm; Explicit…
In this article, a compact finite difference method is proposed for pricing European and American options under jump-diffusion models. Partial integro-differential equation and linear complementary problem governing European and American…