Related papers: Trading Strategy Adipted Optimization of European …
We study the pricing and hedging of European spread options on correlated assets when, in contrast to the standard framework and consistent with imperfect liquidity markets, the trading in the stock market has a direct impact on stocks…
This paper considers utility indifference valuation of derivatives under model uncertainty and trading constraints, where the utility is formulated as an additive stochastic differential utility of both intertemporal consumption and…
Under a generalized skew normal distribution we consider the problem of European option pricing. Existence of the martingale measure is proved. An explicit expression for a given European option price is presented in terms of the cumulative…
We consider stochastic volatility models under parameter uncertainty and investigate how model derived prices of European options are affected. We let the pricing parameters evolve dynamically in time within a specified region, and…
This article is a sequel to [A.H.M.P]. In [A.H.M.P], we develop an explicit formula for pricing European options when the underlying stock price follows a non-linear stochastic delay equation with fixed delays in the drift and diffusion…
We propose a numerical procedure for computing the prices of European options, in which the underlying asset price is a Markovian strict local martingale. If the underlying process is a strict local martingale and the payoff is of linear…
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…
A statistical decision problem is hidden in the core of option pricing. A simple form for the price C of a European call option is obtained via the minimum Bayes risk, R_B, of a 2-parameter estimation problem, thus justifying calling C…
We consider a discrete-time approximation of paths of an Ornstein--Uhlenbeck process as a mean for estimation of a price of European call option in the model of financial market with stochastic volatility. The Euler--Maruyama approximation…
We study scaled trinomial models converging to the Black--Scholes model, and analyze exponential certainty-equivalent prices for path-dependent European options. As the number of trading dates $n$ tends to infinity and the risk aversion is…
Proof that under simple assumptions, such as constraints of Put-Call Parity, the probability measure for the valuation of a European option has the mean derived from the forward price which can, but does not have to be the risk-neutral one,…
In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the…
This study investigates enhancing option pricing by extending the Black-Scholes model to include stochastic volatility and interest rate variability within the Partial Differential Equation (PDE). The PDE is solved using the finite…
Differential equations can be used to construct predictive models of a diverse set of real-world phenomena like heat transfer, predator-prey interactions, and missile tracking. In our work, we explore one particular application of…
In this paper a time-fractional Black-Scholes model (TFBSM) is considered to study the price change of the underlying fractal transmission system. We develop and analyze a numerical method to solve the TFBSM governing European options. The…
We provide an European option pricing formula written in the form of an infinite series of Black Scholes type terms under double Levy jumps model, where both the interest rate and underlying price are driven by Levy process. The series…
In this paper we investigate a nonlinear generalization of the Black-Scholes equation for pricing American style call options in which the volatility term may depend on the underlying asset price and the Gamma of the option. We propose a…
Due to the increasing popularity of futures trading among financial market participants, the risk management of these instruments is crucial. In this paper, we introduce a model for estimating the ideal time for leaving a trading position…
Duality for robust hedging with proportional transaction costs of path dependent European options is obtained in a discrete time financial market with one risky asset. Investor's portfolio consists of a dynamically traded stock and a static…
The distribution of the returns for a stock are not well described by a normal probability density function (pdf). Student's t-distributions, which have fat tails, are known to fit the distributions of the returns. We present pricing of…