Related papers: A brief note on the soundness of Bermudan option p…
It is a consequence of existing literature that least and greatest fixed-points of monotone polynomials on Heyting algebras-that is, the alge- braic models of the Intuitionistic Propositional Calculus-always exist, even when these algebras…
The problem of determining the European-style option price in the incomplete market has been examined within the framework of stochastic optimization. An analytic method based on the discrete dynamic programming equation (Bellman equation)…
Two general algorithms based on opportunity costs are given for approximating a revenue-maximizing set of bids an auctioneer should accept, in a combinatorial auction in which each bidder offers a price for some subset of the available…
We consider plain vanilla European options written on an underlying asset that follows a continuous time semi-Markov multiplicative process. We derive a formula and a renewal type equation for the martingale option price. In the case in…
We consider infinite dimensional optimization problems motivated by the financial model called Arbitrage Pricing Theory. Using probabilistic and functional analytic tools, we provide a dual characterization of the super-replication cost.…
Evaluating moving average options is a tough computational challenge for the energy and commodity market as the payoff of the option depends on the prices of a certain underlying observed on a moving window so, when a long window is…
This paper is devoted to the pricing of Barrier options by optimal quadratic quantization method. From a known useful representation of the premium of barrier options one deduces an algorithm similar to one used to estimate nonlinear filter…
We consider the robust pricing and hedging of American options in a continuous time setting. We assume asset prices are continuous semimartingales, but we allow for general model uncertainty specification via adapted closed convex…
We study American swaptions in the linear-rational (LR) term structure model introduced in [5]. The American swaption pricing problem boils down to an optimal stopping problem that is analytically tractable. It reduces to a free-boundary…
The importance of an adequate inner loop starting point (as opposed to a sufficient inner loop stopping rule) is discussed in the context of a numerical optimization algorithm consisting of nested primal-dual proximal-gradient iterations.…
The robust option pricing problem is to find upper and lower bounds on fair prices of financial claims using only the most minimal assumptions. It contrasts with the classical, model-based approach and gained prominence in the wake of the…
This paper focus on pricing exchange option based on copulas by MCMC algorithm. Initially, we introduce the methodologies concerned about risk-netural pricing, copulas and MCMC algorithm. After the basic knowledge, we compare the option…
Computing reachability probabilities is at the heart of probabilistic model checking. All model checkers compute these probabilities in an iterative fashion using value iteration. This technique approximates a fixed point from below by…
In this article, we study the rate of convergence of prices when a model is approximated by some simplified model. We also provide a method how explicit error formula for more general options can be obtained if such formula is available for…
In the matroid buyback problem, an algorithm observes a sequence of bids and must decide whether to accept each bid at the moment it arrives, subject to a matroid constraint on the set of accepted bids. Decisions to reject bids are…
Cubature rules on the triangle have been extensively studied, as they are of great practical interest in numerical analysis. In most cases, the process by which new rules are obtained does not preclude the existence of similar rules with…
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…
We study the problem of computing the matrix exponential of a block triangular matrix in a peculiar way: Block column by block column, from left to right. The need for such an evaluation scheme arises naturally in the context of option…
Options on baskets (linear combinations) of assets are notoriously challenging to price using even the simplest log-normal continuous-time stochastic models for the individual assets. The paper [5] gives a closed form approximation formula…
We investigate upper and lower hedging prices of multivariate contingent claims from the viewpoint of game-theoretic probability and submodularity. By considering a game between "Market" and "Investor" in discrete time, the pricing problem…