Related papers: Looking Forward to Pricing Options from Binomial T…
Solution techniques for Constraint Satisfaction and Optimisation Problems often make use of backtrack search methods, exploiting variable and value ordering heuristics. In this paper, we propose and analyse a very simple method to apply in…
An American option grants the holder the right to select the time at which to exercise the option, so pricing an American option entails solving an optimal stopping problem. Difficulties in applying standard numerical methods to complex…
We propose and study a multi-scale approach to vector quantization. We develop an algorithm, dubbed reconstruction trees, inspired by decision trees. Here the objective is parsimonious reconstruction of unsupervised data, rather than…
This work focuses on the indifference pricing of American call option underlying a non-traded stock, which may be partially hedgeable by another traded stock. Under the exponential forward measure, the indifference price is formulated as a…
This paper investigates the p-adic valuation trees of degree-2 and degree-3 polynomials in two variables over any prime p, building upon prior research outlined in [14].
In this paper, we present a quantum version of some portions of Mathematical Finance, including theory of arbitrage, asset pricing, and optional decomposition in financial markets based on finite dimensional quantum probability spaces. As…
Pricing of high-dimensional options is one of the most important problems in Mathematical Finance. The objective of this manuscript is to present an original self-contained treatment of the multidimensional pricing. During the past decades…
In the standard Black-Scholes-Merton framework, dividends are represented as a continuous dividend yield and the pricing of Vanilla options on a stock is achieved through the well-known Black-Scholes formula. In reality however, stocks pay…
In this paper, we present a link between preference-based and multiobjective sequential decision-making. While transforming a multiobjective problem to a preference-based one is quite natural, the other direction is a bit less obvious. We…
The main objective of this paper is to present an algorithm of pricing perpetual American put options with asset-dependent discounting. The value function of such an instrument can be described as \begin{equation*}…
Proof that under simple assumptions, such as constraints of Put-Call Parity, the probability measure for the valuation of a European option has the mean derived from the forward price which can, but does not have to be the risk-neutral one,…
We consider the problem of approximation of density functions which is important in the theory of pricing of basket options. Our method is well adopted to the multidimensional case. Observe that implementations of polynomial and spline…
We consider the problem of pricing American Exchange options driven by a L\'evy process. We study the properties of American Exchange options, we represented it as the sum of the price of the corresponding European exchange option price and…
American options are the reference instruments for the model calibration of a large and important class of single stocks. For this task, a fast and accurate pricing algorithm is indispensable. The literature mainly discusses pricing methods…
The main contribution of this paper is the development of a new decision tree algorithm. The proposed approach allows users to guide the algorithm through the data partitioning process. We believe this feature has many applications but in…
An accurate valuation of American call options is critical in most financial decision making environments. However, traditional models like the Barone-Adesi Whaley (B-AW) and Binomial Option Pricing (BOP) methods fall short in handling the…
In this paper we propose an efficient method to compute the price of multi-asset American options, based on Machine Learning, Monte Carlo simulations and variance reduction technique. Specifically, the options we consider are written on a…
This note proposes a method for pricing high-dimensional American options based on modern methods of multidimensional interpolation. The method allows using sparse grids and thus mitigates the curse of dimensionality. A framework of the…
The paper studies sub and super-replication price bounds for contingent claims defined on general trajectory based market models. No prior probabilistic or topological assumptions are placed on the trajectory space, trading is assumed to…
Subdiffusion is a well established phenomenon in physics. In this paper we apply the subdiffusive dynamics to analyze financial markets. We focus on the financial aspect of time fractional diffusion model with moving boundary i.e. American…