Related papers: Error calculus and path sensitivity in financial m…
We deal with the calculation of price sensitivities for stochastic volatility models. General forms for the dynamics of the underlying asset price and its volatility are considered. We make use of the chaotic (or Malliavin) calculus to…
We develop a Malliavin calculus for nonlinear Hawkes processes in the sense of Carlen and Pardoux. This approach, based on perturbations of the jump times of the process, enables the construction of a local Dirichlet form. As an…
We study the error calculus from a mathematical point of view, in particular for the infinite dimensional models met in stochastic analysis. Gauss was the first to propose an error calculus. It can be reinforced by an extension principle…
This study introduces computation of option sensitivities (Greeks) using the Malliavin calculus under the assumption that the underlying asset and interest rate both evolve from a stochastic volatility model and a stochastic interest rate…
We establish an explicit approximation formula for European put option prices within a general stochastic volatility model with time-dependent parameters. Our methodology is based on expansions of the mixing representation of the put option…
In this paper we derive tractable formulae for price sensitivities of two-dimensional spread options using Malliavin calculus. In particular, we consider spread options with asset dynamics driven by geometric Brownian motion and stochastic…
This article proposes a link between statistics and the theory of Dirichlet forms used to compute errors. The error calculus based on Dirichlet forms is an extension of classical Gauss' approach to error propagation. The aim of this paper…
We present recent advances on Dirichlet forms methods either to extend financial models beyond the usual stochastic calculus or to study stochastic models with less classical tools. In this spirit, we interpret the asymptotic error on the…
In this paper, we describe an explicit extension formula in sensitivity analysis regarding the Malliavin weight for jump-diffusion mean-field stochastic differential equations whose local Lipschitz drift coefficients are influenced by 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…
This paper investigates the pricing of financial derivatives and the calculation of their delta Greek when the underlying asset is a jump-diffusion process in which the stochastic intensity component follows the CIR process. Utilizing…
This paper focuses on the study of an original combination of the Multilevel Monte Carlo method introduced by Giles [10] and the popular importance sampling technique. To compute the optimal choice of the parameter involved in the…
The Dirichlet forms methods, in order to represent errors and their propagation, are particularly powerful in infinite dimensional problems such as models involving stochastic analysis encountered in finance or physics, cf. [5]. Now, coming…
Using Malliavin calculus techniques, we derive an analytical formula for the price of European options, for any model including local volatility and Poisson jump process. We show that the accuracy of the formula depends on the smoothness of…
Risk management in financial derivative markets requires inevitably the calculation of the different price sensitivities. The literature contains an abundant amount of research works that have studied the computation of these important…
Local stochastic volatility refers to a popular model class in applied mathematical finance that allows for "calibration-on-the-fly", typically via a particle method, derived from a formal McKean-Vlasov equation. Well-posedness of this…
We propose a method for extending a given asset pricing formula to account for two additional sources of risk: the risk associated with future changes in market--calibrated parameters and the remaining risk associated with idiosyncratic…
In financial mathematics, the calculation of the Greeks, especially the delta, is emphasized due to its role in risk management. In this article, we employ Malliavin calculus to determine the delta of European and Asian options, where the…
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…
We focus on mean-variance hedging problem for models whose asset price follows an exponential additive process. Some representations of mean-variance hedging strategies for jump type models have already been suggested, but none is suited to…