Related papers: A Path Integral Way to Option Pricing
We investigate the approximation of path functionals. In particular, we advocate the use of the Karhunen-Lo\`eve expansion, the continuous analogue of Principal Component Analysis, to extract relevant information from the image of a…
Despite significant advancements in machine learning for derivative pricing, the efficient and accurate valuation of American options remains a persistent challenge due to complex exercise boundaries, near-expiry behavior, and intricate…
We derive the Black-Scholes-Merton dual equation, which has exactly the same form as the Black-Scholes-Merton equation. The novel and general equation works for options with a payoff of homogeneous of degree one, including European,…
The pricing of currency options is largely dependent on the dynamic relationship between a pair of currencies. Typically, the pricing of options with payoffs dependent on multi-assets becomes tricky for reasons such as the non-Gaussian…
Using spectral decomposition techniques and singular perturbation theory, we develop a systematic method to approximate the prices of a variety of options in a fast mean-reverting stochastic volatility setting. Four examples are provided in…
We introduce a model for the dynamics of stock prices based on a non quadratic path integral. The model is a generalization of Ilinski's path integral model, more precisely we choose a different action, which can be tuned to different time…
We proposed classification models that utilize the result from the Quasi-Reversibility Method, which solves the Black-Scholes equation to forecast the option prices one day in advance. Combining the minimizer from QRM with our machine…
Functional integrals are central to modern theories ranging from quantum mechanics and statistical thermodynamics to biology, chemistry, and finance. In this work we present a new method for calculating functional integrals based on a…
We introduce a model for the short-term dynamics of financial assets based on an application to finance of quantum gauge theory, developing ideas of Ilinski. We present a numerical algorithm for the computation of the probability…
We present closed analytical approximations for the pricing of basket options, also applicable to Asian options with discrete averaging under the Black-Scholes model with time-dependent parameters. The formulae are obtained by using a…
We apply rough-path theory to study the discrete-time gamma-hedging strategy. We show that if a trader knows that the market price of a set of European options will be given by a diffusive pricing model, then the discrete-time gamma-hedging…
In this paper we introduce a new approach to model-free path-dependent option pricing. We first introduce a general duality result for linear optimisation problems over signed measures introduced in [3] and show how the the problem of…
Functional It^o calculus is based on an extension of the classical It^o calculus to functionals depending on the entire past evolution of the underlying paths and not only on its current value. The calculus builds on Follmer's…
The Black-Scholes Option pricing model (BSOPM) has long been in use for valuation of equity options to find the prices of stocks. In this work, using BSOPM, we have come up with a comparative analytical approach and numerical technique to…
This paper performs the numerical analysis and the computation of a Spread option in a market with imperfect liquidity. The number of shares traded in the stock market has a direct impact on the stock's price. Thus, we consider a…
We derive a new high-order compact finite difference scheme for option pricing in stochastic volatility jump models, e.g. in Bates model. In such models the option price is determined as the solution of a partial integro-differential…
In this paper, we focus on the tempered subdiffusive Black-Scholes model. The main part of our work consists of the finite difference method as a numerical approach to the option pricing in the considered model. We derive the governing…
In the first part of this thesis, we focus on American options in the Heston model. We first give an analytical characterization of the value function of an American option as the unique solution of the associated (degenerate) parabolic…
Path integrals represent a powerful route to quantization: they calculate probabilities by summing over classical configurations of variables such as fields, assigning each configuration a phase equal to the action of that configuration.…
In this article we develop an explicit formula for pricing European options when the underlying stock price follows a non-linear stochastic differential delay equation (sdde). We believe that the proposed model is sufficiently flexible to…