Related papers: Looking Forward to Pricing Options from Binomial T…
After a brief review of option pricing theory, we introduce various methods proposed for extracting the statistical information implicit in options prices. We discuss the advantages and drawbacks of each method, the interpretation of their…
We develop a conditional sampling scheme for pricing knock-out barrier options under the Linear Transformations (LT) algorithm from Imai and Tan (2006). We compare our new method to an existing conditional Monte Carlo scheme from Glasserman…
In this paper, we study the option pricing problems for rough volatility models. As the framework is non-Markovian, the value function for a European option is not deterministic; rather, it is random and satisfies a backward stochastic…
The aim of this study is to devise numerical methods for dealing with very high-dimensional Bermudan-style derivatives. For such problems, we quickly see that we can at best hope for price bounds, and we can only use a simulation approach.…
In this paper, we introduce an efficient and end-to-end quantum algorithm tailored for computing the Value-at-Risk (VaR) and conditional Value-at-Risk (CVar) for a portfolio of European options. Our focus is on leveraging quantum…
Asian option, as one of the path-dependent exotic options, is widely traded in the energy market, either for speculation or hedging. However, it is hard to price, especially the one with the arithmetic average price. The traditional trading…
Assuming that price of the underlying stock is moving in range bound, the Black-Scholes formula for options pricing supports a separation of variables. The resulting time-independent equation is solved employing different behavior of the…
We study a market model in which the volatility of the stock may jump at a random time from a fixed value to another fixed value. This model was already described in the literature. We present a new approach to the problem, based on partial…
Based on forward curves modelled as Hilbert-space valued processes, we analyse the pricing of various options relevant in energy markets. In particular, we connect empirical evidence about energy forward prices known from the literature to…
This paper proposes an algebraic view of trees which opens the doors to an alternative computational scheme with respect to classic algorithms. In particular, it is shown that this view is very well-suited for machine learning and…
Spivey presented a new approach to evaluate combinatorial sums by using finite differences. We present some closed forms for sums involving the binomial coefficients, Fibonacci and Lucas numbers in terms of the falling factorial.
We reconsider the problem of option pricing using historical probability distributions. We first discuss how the risk-minimisation scheme proposed recently is an adequate starting point under the realistic assumption that price increments…
We introduce a new family of techniques to post-process ("wrap") a black-box classifier in order to reduce its bias. Our technique builds on the recent analysis of improper loss functions whose optimization can correct any twist in…
This paper describes experiments, on two domains, to investigate the effect of averaging over predictions of multiple decision trees, instead of using a single tree. Other authors have pointed out theoretical and commonsense reasons for…
Standard methods of using categorical variables as predictors either endow them with an ordinal structure or assume they have no structure at all. However, categorical variables often possess structure that is more complicated than a linear…
Variable selection is an important statistical problem. This problem becomes more challenging when the candidate predictors are of mixed type (e.g. continuous and binary) and impact the response variable in nonlinear and/or non-additive…
A special type of binomial splitting process is studied. Such a process can be used to model a high-dimensional corner parking problem, as well as the depth of random PATRICIA tries (a special class of digital tree data structures). The…
The purpose of this work is to explore the role that arbitrage opportunities play in pricing financial derivatives. We use a non-equilibrium model to set up a stochastic portfolio, and for the random arbitrage return, we choose a stationary…
This paper does not suppose a priori that the evolution of the price of a financial asset is a semimartingale. Since possible strategies of investors are self-financing, previous prices are forced to be finite quadratic variation processes.…
We develop a numerical method for pricing multidimensional vanilla options in the Black-Scholes framework. In low dimensions, we improve an adaptive integration algorithm proposed by two of the authors by introducing a new splitting…