Related papers: Asian option valuation under price impact
In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the…
In the paper we consider the problem of valuation and hedging of American options written on dividend-paying assets whose price dynamics follow the multidimensional diffusion model. We derive a stochastic balance equation for the American…
Advertising options have been recently studied as a special type of guaranteed contracts in online advertising, which are an alternative sales mechanism to real-time auctions. An advertising option is a contract which gives its buyer a…
This article provides a simple explanation of the asymptotic concavity of the price impact of a meta-order via the microstructural properties of the market. This explanation is made more precise by a model in which the local relationship…
Through the analysis of a dataset of ultra high frequency order book updates, we introduce a model which accommodates the empirical properties of the full order book together with the stylized facts of lower frequency financial data. To do…
In this article, we study the problem of pricing defaultable bond with discrete default intensity and barrier under constant risk free short rate using higher order binary options and their integrals. In our credit risk model, the risk free…
We extend a Discrete Time Random Walk (DTRW) numerical scheme to simulate the anomalous diffusion of financial market orders in a simulated order book. Here using random walks with Sibuya waiting times to include a time-dependent stochastic…
This paper is motivated by questions about averages of stochastic processes which originate in mathematical finance, originally in connection with valuing the so-called Asian options. Starting with research of Yor's in 1992, these questions…
I present an overview of some recent advancements on the empirical analysis and theoretical modeling of the process of price formation in financial markets as the result of the arrival of orders in a limit order book exchange. After…
We propose a new, data-driven approach for efficient pricing of - fixed- and float-strike - discrete arithmetic Asian and Lookback options when the underlying process is driven by the Heston model dynamics. The method proposed in this…
When estimating high-frequency covariance (quadratic covariation) of two arbitrary assets observed asynchronously, simple assumptions, such as independence, are usually imposed on the relationship between the prices process and the…
In a fixed time horizon, appropriately executing a large amount of a particular asset -- meaning a considerable portion of the volume traded within this frame -- is challenging. Especially for illiquid or even highly liquid but also highly…
We provide an extension of the unbiased simulation method for SDEs developed in Henry-Labordere et al. [Ann Appl Probab. 27:6 (2017) 1-37] to a class of path-dependent dynamics, pertaining for Asian options. In our setting, both the payoff…
We study the problem of computing the value function from a discretely-observed trajectory of a continuous-time diffusion process. We develop a new class of algorithms based on easily implementable numerical schemes that are compatible with…
We study the problem of the execution of a moderate size order in an illiquid market within the framework of a solvable Markovian model. We suppose that in order to avoid impact costs, a trader decides to execute her order through a unique…
Employing probabilistic techniques we compute best possible upper and lower bounds on the price of an option on one or two assets with continuous piecewise linear payoff function based on prices of simple call options of possibly distinct…
Financial firms and institutional investors are routinely evaluated based on their performance relative to their peers. These relative performance concerns significantly influence risk-taking behavior and market dynamics. While the…
This work addresses the problem of pricing American basket options in a multivariate setting, which includes among others, the Bachelier and the Black-Scholes models. In high dimensions, nonlinear partial differential equation methods for…
In this work, we present a continuous-time large-population game for modeling market microstructure betweentwo consecutive trades. The proposed modeling framework is inspired by our previous work [23]. In this framework, the Limit Order…
We study the optimal excess-of-loss reinsurance problem when both the intensity of the claims arrival process and the claim size distribution are influenced by an exogenous stochastic factor. We assume that the insurer's surplus is governed…