Related papers: Modelling Derivatives Pricing Mechanisms with Thei…
Global oil price is an important factor in determining many economic variables in the world's economy. It is generally modeled as a stochastic process and have been studied through different techniques by comparing the historic time series…
Deep hedging is a framework for hedging derivatives in the presence of market frictions. In this study, we focus on the problem of hedging a given target option by using multiple options. To extend the deep hedging framework to this…
In this work we present an analytical model, based on the path-integral formalism of Statistical Mechanics, for pricing options using first-passage time problems involving both fixed and deterministically moving absorbing barriers under…
Traditional electric energy markets do not explicitly model generator contingencies. To improve the representation of resources and to enhance the modeling of uncertainty, existing markets are moving in the direction of including generator…
Pricing financial or real options with arbitrary payoffs in regime-switching models is an important problem in finance. Mathematically, it is to solve, under certain standard assumptions, a general form of optimal stopping problems in…
We present new formulations of the stochastic electricity market clearing problem based on the principles of stochastic programming. Previous analyses have established that the canonical stochastic programming model effectively captures the…
In this paper we derive a efficient Monte Carlo approximation for the price of path-dependent derivatives under the multiscale stochastic volatility models of Fouque \textit{et al}. Using the formulation of this pricing problem under the…
The variance gamma model is a widely popular model for option pricing in both academia and industry. In this paper, we provide a new perspective for pricing European style options for the variance gamma model by deriving closed-form…
Predicting volatility is important for asset predicting, option pricing and hedging strategies because it cannot be directly observed in the financial market. The Black-Scholes option pricing model is one of the most widely used models by…
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)…
Since the introduction of the Black-Scholes model stochastic processes have played an increasingly important role in mathematical finance. In many cases prices, volatility and other quantities can be modeled using stochastic ordinary…
We apply Gauge Theory of Arbitrage (GTA) {hep-th/9710148} to derivative pricing. We show how the standard results of Black-Scholes analysis appear from GTA and derive correction to the Black-Scholes equation due to a virtual arbitrage and…
We explain the main concepts of Prospect Theory and Cumulative Prospect Theory within the framework of rational dynamic asset pricing theory. We derive option pricing formulas when asset returns are altered with a generalized Prospect…
We propose three different data-driven approaches for pricing European-style call options using supervised machine-learning algorithms. These approaches yield models that give a range of fair prices instead of a single price point. The…
How to compute (super) hedging costs in rather general fi- nancial market models with transaction costs in discrete-time ? Despite the huge literature on this topic, most of results are characterizations of the super-hedging prices while it…
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…
This paper develops a model for option market making in which the hedging activity of the market maker generates price impact on the underlying asset. The option order flow is modeled by Cox processes, with intensities depending on the…
In this paper we focus on the subdiffusive Black Scholes model. The main part of our work consists of the finite difference method as a numerical approach to the option pricing in the considered model. We derive the governing fractional…
In this article we model a financial derivative price as an observable on the market state function. We apply geometric techniques to integrating the Heisenberg Equation of Motion. We illustrate how the non-commutative nature of the model…
The paper investigates the performance of the European option price when the log asset price follows a rich class of Generalized Tempered Stable (GTS) distribution. The GTS distribution is an alternative to Normal distribution and…