Related papers: Looking Forward to Pricing Options from Binomial T…
In this paper we propose two efficient techniques which allow one to compute the price of American basket options. In particular, we consider a basket of assets that follow a multi-dimensional Black-Scholes dynamics. The proposed…
Options have provided a field of much study because of the complexity involved in pricing them. The Black-Scholes equations were developed to price options but they are only valid for European styled options. There is added complexity when…
It is shown how to obtain accurate values for American options using Monte Carlo simulation. The main feature of the novel algorithm consists of tracking the boundary between exercise and hold regions via optimization of a certain payoff…
Decision trees built with data remain in widespread use for nonparametric prediction. Predicting probability distributions is preferred over point predictions when uncertainty plays a prominent role in analysis and decision-making. We study…
A number of Bermudan option pricing methods that are applicable to options on multiple assets are studied in this thesis, one of the dominating questions being the natural scaling needed to extrapolate from Bermudan to American (both…
In this article we propose a novel approach to reduce the computational complexity of various approximation methods for pricing discrete time American options. Given a sequence of continuation values estimates corresponding to different…
Valuation and parity formulas for both European-style and American-style exchange options are presented in a general financial model allowing for jumps, possibility of default and "bubbles" in asset prices. The formulas are given via…
Introduced in the late 90s, the passport option gives its holder the right to trade in a market and receive any positive gain in the resulting traded account at maturity. Pricing the option amounts to solving a stochastic control problem…
Refining a discrete model of Cheuk and Vorst we obtain a closed formula for the price of a European lookback option at any time between emission and maturity. We derive an asymptotic expansion of the price as the number of periods tends to…
The objective of this paper is to introduce the theory of option pricing for markets with informed traders within the framework of dynamic asset pricing theory. We introduce new models for option pricing for informed traders in complete…
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…
Based on the analog between the stochastic dynamics and quantum harmonic oscillator, we propose a market force driving model to generalize the Black-Scholes model in finance market. We give new schemes of option pricing, in which we can…
We consider an incomplete multi-asset binomial market model. We prove that for a wide class of contingent claims the extremal multi-step martingale measure is a power of the corresponding single-step extremal martingale measure. This allows…
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 examine normal form solutions of decision trees under typical choice functions induced by lower previsions. For large trees, finding such solutions is hard as very many strategies must be considered. In an earlier paper, we extended…
An alphabetic binary tree formulation applies to problems in which an outcome needs to be determined via alphabetically ordered search prior to the termination of some window of opportunity. Rather than finding a decision tree minimizing…
American options are studied in a general discrete market in the presence of proportional transaction costs, modelled as bid-ask spreads. Pricing algorithms and constructions of hedging strategies, stopping times and martingale…
We introduce a new class of forward performance processes that are endogenous and predictable with regards to an underlying market information set and, furthermore, are updated at discrete times. We analyze in detail a binomial model whose…
A new model for the stock market price analysis is proposed. It is suggested to look at price as an everywhere discontinuous function of time of bounded variation.
This paper develops three polynomial-time pricing techniques for European Asian options with provably small errors, where the stock prices follow binomial trees or trees of higher-degree. The first technique is the first known Monte Carlo…