Related papers: Tradable Schemes
This paper uses deep learning to value derivatives. The approach is broadly applicable, and we use a call option on a basket of stocks as an example. We show that the deep learning model is accurate and very fast, capable of producing…
The importance of considering the volumes to analyze stock prices movements can be considered as a well-accepted practice in the financial area. However, when we look at the scientific production in this field, we still cannot find a…
In the framework of Black-Scholes-Merton model of financial derivatives, a path integral approach to option pricing is presented. A general formula to price European path dependent options on multidimensional assets is obtained and…
In this paper new analytical and numerical approaches to valuating path-dependent options of European type have been developed. The model of stochastic volatility as a basic model has been chosen. For European options we could improve the…
In the paper, the pricing of Quanto options is studied, where the underlying foreign asset and the exchange rate are correlated with each other. Firstly, we adopt Bayesian methods to estimate unknown parameters entering the pricing formula…
A new framework for pricing the European currency option is developed in the case where the spot exchange rate fellows a time-changed fractional Brownian motion. An analytic formula for pricing European foreign currency option is proposed…
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…
In the present paper we present a finite element approach for option pricing in the framework of a well-known stochastic volatility model with jumps, the Bates model. In this model the asset log-returns are assumed to follow a…
We derive a recursive formula for arithmetic Asian option prices with finite observation times in semimartingale models. The method is based on the relationship between the risk-neutral expectation of the quadratic variation of the return…
This paper proposes to model asset price dynamics with a mixture of diffusion processes where the instantaneous volatility of the underlying diffusion process contains a random vector. The marginal probability distributions of the proposed…
We consider derivatives written on multiple underlyings in a one-period financial market, and we are interested in the computation of model-free upper and lower bounds for their arbitrage-free prices. We work in a completely realistic…
This paper proposes a numerical method for pricing foreign exchange (FX) options in a model which deals with stochastic interest rates and stochastic volatility of the FX rate. The model considers four stochastic drivers, each represented…
We discuss two numerical methods, based on a path integral approach described in a previous paper (I), for solving the stochastic equations underlying the financial markets: the Monte Carlo approach, and the Green function deterministic…
The purpose of the paper is to present a new pricing method for clean spread options, and to illustrate its main features on a set of numerical examples produced by a dedicated computer code. The novelty of the approach is embedded in the…
Artificial neural networks (ANNs) have recently also been applied to solve partial differential equations (PDEs). In this work, the classical problem of pricing European and American financial options, based on the corresponding PDE…
When trading American and Asian options in the FX derivatives market, banks must calculate prices using a complex mathematical model. It is often observed that different models produce varying prices for the same exotic option, which…
We establish several closed pricing formula for various path-independent payoffs, under an exponential L\'evy model driven by the Variance Gamma process. These formulas take the form of quickly convergent series and are obtained via tools…
In this paper, we consider option pricing in a framework of the fractional Heston-type model with $H>1/2$. As it is impossible to obtain an explicit formula for the expectation $\mathbb E f(S_T)$ in this case, where $S_T$ is the asset price…
We model the logarithm of the price (log-price) of a financial asset as a random variable obtained by projecting an operator stable random vector with a scaling index matrix $\underline{\underline{E}}$ onto a non-random vector. The scaling…
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…