Related papers: Option pricing with log-stable L\'{e}vy processes
We provide closed-form pricing formulas for a wide variety of path-independent options, in the exponential L\'evy model driven by the Normal inverse Gaussian process. The results are obtained in both the symmetric and asymmetric model, and…
The Black-Scholes model (sometimes known as the Black-Scholes-Merton model) gives a theoretical estimate for the price of European options. The price evolution under this model is described by the Black-Scholes formula, one of the most…
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…
This paper considers the pricing of long-term options on assets such as housing, where either government intervention or the economic nature of the asset is assumed to limit large falls in prices. The observed asset price is modelled by a…
We study the Option pricing with linear investment strategy based on discrete time trading of the underlying security, which unlike the existing continuous trading models provides a feasible real market implementation. Closed form formulas…
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…
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…
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…
In this study we consider the pricing of energy derivatives when the evolution of spot prices is modeled with a normal tempered stable driven Ornstein-Uhlenbeck process. Such processes are the generalization of normal inverse Gaussian…
In common finance literature, Black-Scholes partial differential equation of option pricing is usually derived with no-arbitrage principle. Considering an asset market, Merton applied the Hamilton-Jacobi-Bellman techniques of his…
We price European options in a class of models in which the volatility of the underlying risky asset depends on the short rate of interest. Our study results in an explicit pricing formula that depends on knowledge of a characteristic…
We consider closed-form approximations for European put option prices within the Heston and GARCH diffusion stochastic volatility models with time-dependent parameters. Our methodology involves writing the put option price as an expectation…
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 commodity and energy markets swing options allow the buyer to hedge against futures price fluctuations and to select its preferred delivery strategy within daily or periodic constraints, possibly fixed by observing quoted futures…
We consider a Black-Scholes type equation arising on a pricing model for a multi-asset option with general transaction costs. The pioneering work of Leland is thus extended in two different ways: on the one hand, the problem is…
We introduce a simple model for equity index derivatives. The model generalizes well known L\`evy Normal Tempered Stable processes (e.g. NIG and VG) with time dependent parameters. It accurately fits Equity index implied volatility surfaces…
In financial markets, accurately measuring the risk of future fluctuations in asset prices is of paramount importance. Studies such as Carr and Madan have shown that the expected value of the quadratic variation of log prices can be…
The pricing of financial derivatives, which requires massive calculations and close-to-real-time operations under many trading and arbitrage scenarios, were largely infeasible in the past. However, with the advancement of modern computing,…
We introduce the Local Occupied Volatility (LOV) model that sits between Dupire's local volatility and fully path-dependent dynamics. By design, the LOV model ensures automatic calibration to European vanilla options, while offering the…
We consider the problem of pricing perpetual American options written on dividend-paying assets whose price dynamics follow a multidimensional Black and Scholes model. For convex Lipschitz continuous reward functions, we give a…