Related papers: A Path Integral Approach to Derivative Security Pr…
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…
Non-equilibrium phenomena occur not only in physical world, but also in finance. In this work, stochastic relaxational dynamics (together with path integrals) is applied to option pricing theory. A recently proposed model (by Ilinski et…
The aim of this work is to provide fast and accurate approximation schemes for the Monte-Carlo pricing of derivatives in the L\'evy LIBOR model of Eberlein and \"Ozkan (2005). Standard methods can be applied to solve the stochastic…
Quasi-Monte Carlo (QMC) method is a useful numerical tool for pricing and hedging of complex financial derivatives. These problems are usually of high dimensionality and discontinuities. The two factors may significantly deteriorate the…
We consider a general path-dependent version of the hedging problem with price impact of Bouchard et al. (2019), in which a dual formulation for the super-hedging price is obtained by means of PDE arguments, in a Markovian setting and under…
Monte Carlo is a simple and flexible tool that is widely used in computational finance. In this context, it is common for the quantity of interest to be the expected value of a random variable defined via a stochastic differential equation.…
Using tools from spectral analysis, singular and regular perturbation theory, we develop a systematic method for analytically computing the approximate price of a derivative-asset. The payoff of the derivative-asset may be path-dependent.…
We shall study backward stochastic differential equations and we will present a new approach for the existence of the solution. This type of equation appears very often in the valuation of financial derivatives in complete markets.…
In this article we consider the problem of pricing and hedging high-dimensional Asian basket options by Quasi-Monte Carlo simulation. We assume a Black-Scholes market with time-dependent volatilities and show how to compute the deltas by…
Recent studies have demonstrated the efficiency of Variational Autoencoders (VAE) to compress high-dimensional implied volatility surfaces into a low dimensional representation. Although this method can be effectively used for pricing…
Path integral control solves a class of stochastic optimal control problems with a Monte Carlo (MC) method for an associated Hamilton-Jacobi-Bellman (HJB) equation. The MC approach avoids the need for a global grid of the domain of the HJB…
In this paper we propose a novel dual regression-based approach for pricing American options. This approach reduces the complexity of the nested Monte Carlo method and has especially simple form for time discretised diffusion processes. We…
In this paper we derive an effective equation for derivative pricing which accounts for the presence of virtual arbitrage opportunities and their elimination by the market. We model the arbitrage return by a stochastic process and find an…
In this paper we present two parallel Monte Carlo based algorithms for pricing multi--dimensional Bermudan/American options. First approach relies on computation of the optimal exercise boundary while the second relies on classification of…
We address the possibility of performing numerical Monte Carlo simulations for the thermodynamics of quantum dissipative systems. Dissipation is considered within the Caldeira-Leggett formulation, which describes the system in the…
We present in detail a formulation of the shell model as a path integral and Monte Carlo techniques for its evaluation. The formulation, which linearizes the two-body interaction by an auxiliary field, is quite general, both in the form of…
This paper presents numerical algorithm and results for pricing a capital protection option offered by many asset managers for investment portfolios to take advantage of market growth and protect savings. Under optimal withdrawal…
We consider a method of lines (MOL) approach to determine prices of European and American exchange options when underlying asset prices are modelled with stochastic volatility and jump-diffusion dynamics. As the MOL, as with any other…
Typically options with a path dependent payoff, such as Target Accumulation Redemption Note (TARN), are evaluated by a Monte Carlo method. This paper describes a finite difference scheme for pricing a TARN option. Key steps in the proposed…
Our goal is to analyze the system of Hamilton-Jacobi-Bellman equations arising in derivative securities pricing models. The European style of an option price is constructed as a difference of the certainty equivalents to the value functions…