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This research presents a comprehensive evaluation of systematic index option-writing strategies, focusing on S&P500 index options. We compare the performance of hedging strategies using the Black-Scholes-Merton (BSM) model and the…
A master equation approach to the numerical solution of option pricing models is developed. The basic idea of the approach is to consider the Black--Scholes equation as the macroscopic equation of an underlying mesoscopic stochastic option…
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…
We examine the empirical performance of some parametric and nonparametric estimators of prices of options with a fixed time to maturity, focusing on variance-gamma and Heston models on one side, and on expansions in Hermite functions on the…
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…
In today's era of big data, deep learning and artificial intelligence have formed the backbone for cryptocurrency portfolio optimization. Researchers have investigated various state of the art machine learning models to predict Bitcoin…
This paper presents a novel way to predict options price for one day in advance, utilizing the method of Quasi-Reversibility for solving the Black-Scholes equation. The Black-Scholes equation solved forwards in time with Tikhonov…
In financial mathematics, it is a typical approach to approximate financial markets operating in discrete time by continuous-time models such as the Black Scholes model. Fitting this model gives rise to difficulties due to the discrete…
An efficient computational algorithm to price financial derivatives is presented. It is based on a path integral formulation of the pricing problem. It is shown how the path integral approach can be worked out in order to obtain fast and…
In this paper we investigate a nonlinear generalization of the Black-Scholes equation for pricing American style call options in which the volatility term may depend on the underlying asset price and the Gamma of the option. We propose a…
Digital currencies and cryptocurrencies have hesitantly started to penetrate the investors, and the next step will be the regulatory risk management framework. We examine the Value-at-Risk and Expected Shortfall properties for the major…
Assuming that price of the underlying stock is moving in range bound, the Black-Scholes formula for options pricing supports a separation of variables. The resulting time-independent equation is solved employing different behavior of the…
We propose an efficient lattice procedure which permits to obtain European and American option prices under the Black and Scholes model for digital options with barrier features. Numerical results show the accuracy of the proposed method.
This paper discusses the dynamics of intraday prices of twelve cryptocurrencies during last months' boom and bust. The importance of this study lies on the extended coverage of the cryptoworld, accounting for more than 90\% of the total…
This research proposes a novel arbitrage approach in multivariate pair trading, termed the Optimal Trading Technique (OTT). We present a method for selectively forming a "bucket" of fiat currencies anchored to cryptocurrency for monitoring…
This study analyzes the transmission of market uncertainty on key European financial markets and the cryptocurrency market over an extended period, encompassing the pre, during, and post-pandemic periods. Daily financial market indices and…
The LIBOR Market Model (LMM) is a widely used model for pricing interest rate derivatives. While the Black-Scholes model is well-known for pricing stock derivatives such as stock options, a larger portion of derivatives are based on…
In this paper we propose an efficient method to compute the price of multi-asset American options, based on Machine Learning, Monte Carlo simulations and variance reduction technique. Specifically, the options we consider are written on a…
Digital currencies have become popular in the last decade due to their non-dependency and decentralized nature. The price of these currencies has seen a lot of fluctuations at times, which has increased the need for prediction. As their…
Barrier options are one of the most widely traded exotic options on stock exchanges. In this paper, we develop a new stochastic simulation method for pricing barrier options and estimating the corresponding execution probabilities. We show…