Related papers: Pricing Exotic Options in a Path Integral Approach
In this paper, we study the asymptotic behavior of Asian option prices in the worst case scenario under an uncertain volatility model. We give a procedure to approximate the Asian option prices with a small volatility interval. By imposing…
In this work, we present a quantum algorithm designed to solve the differential equation used in the pricing of Asian options, in the framework of the Black-Scholes model. Our approach modifies an existing quantum pre-conditioning method…
The aim of this paper is to investigate the use of close formula approximation for pricing European mortgage options. Under the assumption of logistic duration and normal mortgage rates the underlying price at the option expiry is…
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…
The Black-Scholes option pricing model remains a cornerstone in financial mathematics, yet its application is often challenged by the need for accurate hedging strategies, especially in dynamic market environments. This paper presents a…
In financial mathematics, it is a typical approach to approximate financial markets operating in discrete time by continuous-time models such as the Black Scholes model. Fitting this model gives rise to difficulties due to the discrete…
In this paper, an integral equation representation for the early exercise boundary of an American option contract is considered. Thus far, a number of different techniques have been proposed in the literature to obtain a variety of integral…
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 this research, we proposed a Mean Convection Finite Difference Method (MCFDM) for European options pricing. The Black-Scholes model, which describes the dynamics of a financial asset, was first transformed into a convection-diffusion…
This paper addresses the challenges of pricing exotic options and structured products, which traditional models often fail to handle due to their inability to capture real-world market phenomena like fat-tailed distributions and volatility…
We introduce signature payoffs, a family of path-dependent derivatives that are given in terms of the signature of the price path of the underlying asset. We show that these derivatives are dense in the space of continuous payoffs, a result…
In this paper we derive semi-closed form prices of barrier (perhaps, time-dependent) options for the Hull-White model, ie., where the underlying follows a time-dependent OU process with a mean-reverting drift. Our approach is similar to…
The paper summarizes key results of the benchmark approach with a focus on the concept of benchmark-neutral pricing. It applies these results to the pricing of an extreme-maturity European put option on a well-diversified stock index. The…
Refining a discrete model of Cheuk and Vorst we obtain a closed formula for the price of a European lookback option at any time between emission and maturity. We derive an asymptotic expansion of the price as the number of periods tends to…
The paper develops general, discrete, non-probabilistic market models and minmax price bounds leading to price intervals for European options. The approach provides the trajectory based analogue of martingale-like properties as well as a…
Following the recent great advance of quantum computing technology, there are growing interests in its applications to industries, including finance. In this paper, we focus on derivative pricing based on solving the Black-Scholes partial…
In a global derivatives market with notional values in the hundreds of trillions of dollars, the accuracy and efficiency of pricing models are of fundamental importance, with direct implications for risk management, capital allocation, and…
We consider the problem of pricing basket options in a multivariate Black Scholes or Variance Gamma model. From a numerical point of view, pricing such options corresponds to moderate and high dimensional numerical integration problems with…
We propose a probabilistic framework for pricing derivatives, which acknowledges that information and beliefs are subjective. Market prices can be translated into implied probabilities. In particular, futures imply returns for these implied…
In common finance literature, Black-Scholes partial differential equation of option pricing is usually derived with no-arbitrage principle. Considering an asset market, Merton applied the Hamilton-Jacobi-Bellman techniques of his…