Related papers: Pricing American Options Time-Capped by a Drawdown…

In this paper we propose two efficient techniques which allow one to compute the price of American basket options. In particular, we consider a basket of assets that follow a multi-dimensional Black-Scholes dynamics. The proposed…

A new method for stochastic control based on neural networks and using randomisation of discrete random variables is proposed and applied to optimal stopping time problems. The method models directly the policy and does not need the…

We establish an explicit approximation formula for European put option prices within a general stochastic volatility model with time-dependent parameters. Our methodology is based on expansions of the mixing representation of the put option…

We study the leading term in the small-time asymptotics of at-the-money call option prices when the stock price process $S$ follows a general martingale. This is equivalent to studying the first centered absolute moment of $S$. We show that…

We study the Option pricing with linear investment strategy based on discrete time trading of the underlying security, which unlike the existing continuous trading models provides a feasible real market implementation. Closed form formulas…

An option market maker incurs funding costs when carrying and hedging inventory. To hedge a net long delta inventory, for example, she pays a fee to borrow stock from the securities lending market. Because of haircuts, she posts additional…

Developments in finance industry and academic research has led to innovative financial products. This paper presents an alternative approach to price American options. Our approach utilizes famous \cite{heath1992bond} ("HJM") technique to…

In this paper we consider the problem of pricing a perpetual American put option in an exponential regime-switching L\'{e}vy model. For the case of the (dense) class of phase-type jumps and finitely many regimes we derive an explicit…

We study the behavior of the critical price of an American put option near maturity in the exponential L\'evy model when the underlying stock pays dividends at a continuous rate. In particular, we prove that, in situations where the limit…

In this work, we expand the idea of Samuelson[3] and Shepp[2,5,6] for stock optimization using the Bachelier model [4] as our models for the stock price at the money (X[stock price]= K[strike price]) for the American call and put options…

We consider arbitrage free valuation of European options in Black-Scholes and Merton markets, where the general structure of the market is known, however the specific parameters are not known. In order to reflect this subjective uncertainty…

In this paper we propose a semi-analytic approach to pricing American options for time-dependent jump-diffusions models with exponential jumps The idea of the method is to further generalize our approach developed for pricing barrier,…

We approximate the price of the American put for jump diffusions by a sequence of functions, which are computed iteratively. This sequence converges to the price function uniformly and exponentially fast. Each element of the approximating…

We consider as given a discrete time financial market with a risky asset and options written on that asset and determine both the sub- and super-hedging prices of an American option in the model independent framework of ArXiv:1305.6008. We…

The Black-Scholes theory of option pricing has been considered for many years as an important but very approximate zeroth-order description of actual market behavior. We generalize the functional form of the diffusion of these systems and…

In this work, we propose an algorithm to price American options by directly solving the dual minimization problem introduced by Rogers. Our approach relies on approximating the set of uniformly square integrable martingales by a finite…

We present the method of moments approach to pricing barrier-type options when the underlying is modelled by a general class of jump diffusions. By general principles the option prices are linked to certain infinite dimensional linear…

Our goal here is to discuss the pricing problem of European and American options in discrete time using elementary calculus so as to be an easy reference for first year undergraduate students. Using the binomial model we compute the fair…

We study the barrier that gives the optimal time to exercise an American option written on a time-dependent Ornstein--Uhlenbeck process, a diffusion often adopted by practitioners to model commodity prices and interest rates. By framing the…

We consider a generic market model with a single stock and with random volatility. We assume that there is a number of tradable options for that stock with different strike prices. The paper states the problem of finding a pricing rule that…