Related papers: Practical guide to real options in discrete time
The real options approach is now considered an effective alternative to the corporate DCF model for a feasibility study. The current paper offers a practical methodology employing binomial trees and real options techniques for evaluating…
In this paper, we propose a machine learning algorithm for time-inconsistent portfolio optimization. The proposed algorithm builds upon neural network based trading schemes, in which the asset allocation at each time point is determined by…
This paper investigates the pricing of European-style lookback options when the price dynamics of the underlying risky asset are assumed to follow a Markov-modulated Geo-metric Brownian motion; that is, the appreciation rate and the…
In regression problems where there is no known true underlying model, conformal prediction methods enable prediction intervals to be constructed without any assumptions on the distribution of the underlying data, except that the training…
This paper is devoted to the price-storage dynamics in natural gas markets. A novel stochastic path-dependent volatility model is introduced with path-dependence in both price volatility and storage increments. Model calibrations are…
We develop a novel deep learning approach for pricing European options in diffusion models, that can efficiently handle high-dimensional problems resulting from Markovian approximations of rough volatility models. The option pricing partial…
We study the optimal control of discrete time mean filed dynamical systems under partial observations. We express the global law of the filtered process as a controlled system with its own dynamics. Following a dynamic programming approach,…
Continuous time stochastic processes are useful models especially for financial and insurance purposes. The numerical simulation of such models is dependant of the time discrete discretization, of the parametric estimation and of the choice…
The pricing of options, warrants and other derivative securities is one of the great success of financial economics. These financial products can be modeled and simulated using quantum mechanical instruments based on a Hamiltonian…
We propose a pairs trading model that incorporates a time-varying volatility of the Constant Elasticity of Variance type. Our approach is based on stochastic control techniques; given a fixed time horizon and a portfolio of two…
American options in a multi-asset market model with proportional transaction costs are studied in the case when the holder of an option is able to exercise it gradually at a so-called mixed (randomised) stopping time. The introduction of…
Stochastic processes find applications in modelling systems in a variety of disciplines. A large number of stochastic models considered are Markovian in nature. It is often observed that higher order Markov processes can model the data…
In this article we discuss the problem of calculating optimal model-independent (robust) bounds for the price of Asian options with discrete and continuous averaging. We will give geometric characterisations of the maximising and the…
Stochastic processes time-changed by an inverse subordinator have been suggested as a way to model the price of assets in illiquid markets, where the jumps of the subordinator correspond to periods of time where one is unable to sell an…
The Black-Scholes implied volatility skew at the money of SPX options is known to obey a power law with respect to the time-to-maturity. We construct a model of the underlying asset price process which is dynamically consistent to the power…
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…
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…
We study a robust utility maximization problem in a general discrete-time frictionless market under quasi-sure no-arbitrage. The investor is assumed to have a random and concave utility function defined on the whole real-line. She also…
The objective of this paper is to introduce the theory of option pricing for markets with informed traders within the framework of dynamic asset pricing theory. We introduce new models for option pricing for informed traders in complete…
We propose a new approach to quantize the marginals of the discrete Euler diffusion process. The method is built recursively and involves the conditional distribution of the marginals of the discrete Euler process. Analytically, the method…