Related papers: Robust Volatility Index Calculation with OTM Optio…

In the regime switching extension of Black-Scholes-Merton model of asset price dynamics, one assumes that the volatility coefficient evolves as a hidden pure jump process. Under the assumption of Markov regime switching, we have considered…

This paper explores the application of Machine Learning techniques for pricing high-dimensional options within the framework of the Uncertain Volatility Model (UVM). The UVM is a robust framework that accounts for the inherent…

This paper presents a new model for options pricing. The Black-Scholes-Merton (BSM) model plays an important role in financial options pricing. However, the BSM model assumes that the risk-free interest rate, volatility, and equity premium…

It is well-known that the Black-Scholes formula has been derived under the assumption of constant volatility in stocks. In spite of evidence that this parameter is not constant, this formula is widely used by financial markets. This paper…

Based on empirical market data, a stochastic volatility model is proposed with volatility driven by fractional noise. The model is used to obtain a risk-neutrality option pricing formula and an option pricing equation.

After a brief review of option pricing theory, we introduce various methods proposed for extracting the statistical information implicit in options prices. We discuss the advantages and drawbacks of each method, the interpretation of their…

The aim of this paper is to present a simple stochastic model that accounts for the effects of a long-memory in volatility on option pricing. The starting point is the stochastic Black-Scholes equation involving volatility with long-range…

This paper proposes a new integrated variance estimator based on order statistics within the framework of jump-diffusion models. Its ability to disentangle the integrated variance from the total process quadratic variation is confirmed by…

We derive a semi-analytical pricing formula for European VIX call options under the Heston-Hawkes stochastic volatility model introduced in arXiv:2210.15343. This arbitrage-free model incorporates the volatility clustering feature by adding…

We estimate prices of exotic options in a discrete-time model-free setting when the trader has access to market prices of a rich enough class of exotic and vanilla options. This is achieved by estimating an unobservable quantity called…

Range-based volatility estimators are widely used in financial econometrics to quantify risk and market stress, yet their application to local commodity markets remains limited. This paper shows how open-high--low-close (OHLC) volatility…

We consider stochastic volatility models under parameter uncertainty and investigate how model derived prices of European options are affected. We let the pricing parameters evolve dynamically in time within a specified region, and…

Recent empirical studies suggest that the volatilities associated with financial time series exhibit short-range correlations. This entails that the volatility process is very rough and its autocorrelation exhibits sharp decay at the…

We introduce a modular framework that extends the signature method to handle American option pricing under evolving volatility roughness. Building on the signature-pricing framework of Bayer et al. (2025), we add three practical…

We present a multivariate stochastic volatility model with leverage, which is flexible enough to recapture the individual dynamics as well as the interdependencies between several assets while still being highly analytically tractable.…

We design a novel calibration procedure that is designed to handle the specific characteristics of options on cryptocurrency markets, namely large bid-ask spreads and the possibility of missing or incoherent prices in the considered data…

We explore credit risk pricing by modeling equity as a call option and debt as the difference between the firm's asset value and a put option, following the structural framework of the Merton model. Our approach proceeds in two stages:…

The vast majority of works on option pricing operate on the assumption of risk neutral valuation, and consequently focus on the expected value of option returns, and do not consider risk parameters, such as variance. We show that it is…

As a forward-looking measure of future equity market volatility, the VIX index has gained immense popularity in recent years to become a key measure of risk for market analysts and academics. We consider discrete reported intraday VIX tick…

We consider the pricing of derivatives written on the discretely sampled realized variance of an underlying security. In the literature, the realized variance is usually approximated by its continuous-time limit, the quadratic variation of…