Related papers: Static Arbitrage Bounds on Basket Option Prices
Martingale optimal transport (MOT) often yields broad price bounds for options, constraining their practical applicability. In this study, we extend MOT by incorporating causality constraints among assets, inspired by the nonanticipativity…
Many important economic outcomes result from the combined effects of several choices, so the best option is not determined from each choice in isolation, but depends on how each choice alters total outcomes. We formally show that narrow…
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…
This paper studies equity basket options -- i.e., multi-dimensional derivatives whose payoffs depend on the value of a weighted sum of the underlying stocks -- and develops a new and innovative approach to ensure consistency between options…
Nowadays many financial derivatives, such as American or Bermudan options, are of early exercise type. Often the pricing of early exercise options gives rise to high-dimensional optimal stopping problems, since the dimension corresponds to…
The pricing and hedging of a general class of options (including American, Bermudan and European options) on multiple assets are studied in the context of currency markets where trading is subject to proportional transaction costs, and…
Absolute value linear programming problems is quite a new area of optimization problems, involving linear functions and absolute values in the description of the model. In this paper, we consider interval uncertainty of the input…
We present closed analytical approximations for the pricing of Asian basket spread options under the Black-Scholes model. The formulae are obtained by using a stochastic Taylor expansion around a log-normal proxy model and are found to be…
Options have provided a field of much study because of the complexity involved in pricing them. The Black-Scholes equations were developed to price options but they are only valid for European styled options. There is added complexity when…
The pricing of derivatives tied to baskets of assets demands a sophisticated framework that aligns with the available market information to capture the intricate non-linear dependency structure among the assets. We describe the dynamics of…
This paper starts by defining the criteria where the early-exercise of an American option is never optimal, under positive, or negative rates. It follows with a short analysis of the various shapes of the exercise region under negative…
We construct algorithms for computation of prices and superhedging strategies for game options in general discrete markets both from the seller and the buyer points of view.
We consider the pricing of American put options in a model-independent setting: that is, we do not assume that asset prices behave according to a given model, but aim to draw conclusions that hold in any model. We incorporate market…
In this paper, we propose the uncertain volatility models with stochastic bounds. Like the regular uncertain volatility models, we know only that the true model lies in a family of progressively measurable and bounded processes, but instead…
Optimal pricing of European call option is described by linear stochastic differential equation. Trading strategy given by a twin of stochastic variables was integrated w.r.t. Black-Scholes formula to adopt optimal pricing to tarading…
We introduce linear programs encoding regular expressions of finite languages. We show that, given a language, the optimum value of the associated linear program is a lower bound on the size of any regular expression of the language.…
This paper develops algorithms to solve strong-substitutes product-mix auctions. That is, it finds competitive equilibrium prices and quantities for agents who use this auction's bidding language to truthfully express their…
Within a financial model with linear price impact, we study the problem of hedging a covered European option under gamma constraint. Using stochastic target and partial differential equation smoothing techniques, we prove that the…
Building on ideas from online convex optimization, we propose a general framework for the design of efficient securities markets over very large outcome spaces. The challenge here is computational. In a complete market, in which one…
In the present work, the European option pricing SWIFT method is extended for Heston model calibration. The computation of the option price gradient is simplified thanks to the knowledge of the characteristic function in closed form. The…