Related papers: Explicit Rational Formulae for Bachelier (Normal) …
Continuous time models in the theory of real options give explicit formulas for optimal exercise strategies when options are simple and the price of an underlying asset follows a geometric Brownian motion. This paper suggests a general,…
Options with maturities below one week, hereafter "ultra-short-term" options, have seen a sharp increase in trading activity in recent years. Yet, these instruments are difficult to price jointly using classical pricing models due to the…
We introduce a new identification strategy for uncertainty shocks to explain macroeconomic volatility in financial markets. The Chicago Board Options Exchange Volatility Index (VIX) measures market expectations of future volatility, but…
We present ThiopheneIV, a Black-Scholes implied-volatility solver with a monotone core and explicit production guards. The solver starts from the simple Choi-Huh-Su L3 lower-bound seed and applies three Euler-Chebyshev steps on a lower…
Option pricing formulas are derived from a non-Gaussian model of stock returns. Fluctuations are assumed to evolve according to a nonlinear Fokker-Planck equation which maximizes the Tsallis nonextensive entropy of index $q$. A generalized…
In the framework of propositional {\L}ukasiewicz logic, a suitable notion of implicit definability, tailored to the intended real-valued semantics and referring to the elements of its domain, is introduced. Several variants of implicitly…
An explicit martingale representation for random variables described as a functional of a Levy process will be given. The Clark-Ocone theorem shows that integrands appeared in a martingale representation are given by conditional…
Recent empirical studies suggest that the volatility of an underlying price process may have correlations that decay slowly under certain market conditions. In this paper, the volatility is modeled as a stationary process with long-range…
Following-up Fukasawa and Gatheral (Frontiers of Mathematical Finance, 2022), we prove that the BBF formula, the SABR formula, and the rough SABR formula provide asymptotically arbitrage-free approximations of the implied volatility under,…
We investigate whether it is possible to formulate option pricing and hedging models without using probability. We present a model that is consistent with two notions of volatility: a historical volatility consistent with statistical…
The aim of this article is to provide a systematic analysis of the conditions such that Fourier transform valuation formulas are valid in a general framework; i.e. when the option has an arbitrary payoff function and depends on the path of…
Variational methods are employed in situations where exact Bayesian inference becomes intractable due to the difficulty in performing certain integrals. Typically, variational methods postulate a tractable posterior and formulate a lower…
This paper studies the hazard-free formula complexity of Boolean functions. Our first result shows that unate functions are the only Boolean functions for which the monotone formula complexity of the hazard-derivative equals the hazard-free…
We consider a class of assets whose risk-neutral pricing dynamics are described by an exponential L\'evy-type process subject to default. The class of processes we consider features locally-dependent drift, diffusion and default-intensity…
We develop a dynamic version of the SSVI parameterisation for the total implied variance, ensuring that European vanilla option prices are martingales, hence preventing the occurrence of arbitrage, both static and dynamic. Insisting on the…
Many different systems with explicit substitutions have been proposed to implement a large class of higher-order languages. Motivations and challenges that guided the development of such calculi in functional frameworks are surveyed in the…
This paper introduces the Inverse Gamma (IGa) stochastic volatility model with time-dependent parameters, defined by the volatility dynamics $dV_{t}=\kappa_{t}\left(\theta_{t}-V_{t}\right)dt+\lambda_{t}V_{t}dB_{t}$. This non-affine model is…
This paper derives explicit formulas for both the small and large time limits of the implied volatility in the minimal market model. It is shown that interest rates do impact on the implied volatility in the long run even though they are…
We obtain a decomposition of the call option price for a very general stochastic volatility diffusion model extending the decomposition obtained by E. Al\`os in [2] for the Heston model. We realize that a new term arises when the stock…
We study the pricing of European-style options written on forward contracts within function-valued infinite-dimensional affine stochastic volatility models. The dynamics of the underlying forward price curves are modeled within the…