Related papers: Option Pricing without Price Dynamics: A Probabili…
We present an adaptive approach for valuing the European call option on assets with stochastic volatility. The essential feature of the method is a reduction of uncertainty in latent volatility due to a Bayesian learning procedure. Starting…
The pricing of options, warrants and other derivative securities is one of the great success of financial economics. These financial products can be modeled and simulated using quantum mechanical instruments based on a Hamiltonian…
In this paper new analytical and numerical approaches to valuating path-dependent options of European type have been developed. The model of stochastic volatility as a basic model has been chosen. For European options we could improve the…
Advertising options have been recently studied as a special type of guaranteed contracts in online advertising, which are an alternative sales mechanism to real-time auctions. An advertising option is a contract which gives its buyer a…
We propose a novel distribution-free scheme to solve optimization problems where the goal is to minimize the expected value of a cost function subject to probabilistic constraints. Unlike standard sampling-based methods, our idea consists…
We consider the problem of computing upper and lower bounds on the price of a European basket call option, given prices on other similar baskets. Although this problem is very hard to solve exactly in the general case, we show that in some…
Simultaneous ascending auctions present agents with the exposure problem: bidding to acquire a bundle risks the possibility of obtaining an undesired subset of the goods. Auction theory provides little guidance for dealing with this…
We study the following fundamental data-driven pricing problem. How can/should a decision-maker price its product based on data at a single historical price? How valuable is such data? We consider a decision-maker who optimizes over…
In this paper I develop a new computational method for pricing path dependent options. Using the path integral representation of the option price, I show that in general it is possible to perform analytically a partial averaging over the…
In incomplete financial markets, pricing and hedging European options lack a unique no-arbitrage solution due to unhedgeable risks. This paper introduces a constrained deep learning approach to determine option prices and hedging strategies…
We develop a model for indifference pricing in derivatives markets where price quotes have bid-ask spreads and finite quantities. The model quantifies the dependence of the prices and hedging portfolios on an investor's beliefs, risk…
We present an approach for pricing European call options in presence of proportional transaction costs, when the stock price follows a general exponential L\'{e}vy process. The model is a generalization of the celebrated work of Davis,…
An efficient computational algorithm to price financial derivatives is presented. It is based on a path integral formulation of the pricing problem. It is shown how the path integral approach can be worked out in order to obtain fast and…
We propose an innovative data-driven option pricing methodology that relies exclusively on the dataset of historical underlying asset prices. While the dataset is rooted in the objective world, option prices are commonly expressed as…
Given the marginal distribution information of the underlying asset price at two future times $T_1$ and $T_2$, we consider the problem of determining a model-free upper bound on the price of a class of American options that must be…
We study the problem of option pricing and hedging strategies within the frame-work of risk-return arguments. An economic agent is described by a utility function that depends on profit (an expected value) and risk (a variance). In the…
We obtain option pricing formulas for stock price models in which the drift and volatility terms are functionals of a continuous history of the stock prices. That is, the stock dynamics follows a nonlinear stochastic functional differential…
This paper deals with a high-order accurate implicit finite-difference approach to the pricing of barrier options. In this way various types of barrier options are priced, including barrier options paying rebates, and options on…
In this paper we provide a theoretical analysis of Variable Annuities with a focus on the holder's right to an early termination of the contract. We obtain a rigorous pricing formula and the optimal exercise boundary for the surrender…
Based on empirical market data, a stochastic volatility model is proposed with volatility driven by fractional noise. The model is used to obtain a risk-neutrality option pricing formula and an option pricing equation.