Related papers: Pricing options with VG model using FFT
This paper develops a European option pricing formula for fractional market models. Although there exist option pricing results for a fractional Black-Scholes model, they are established without accounting for stochastic volatility. In this…
In this research, we proposed a Mean Convection Finite Difference Method (MCFDM) for European options pricing. The Black-Scholes model, which describes the dynamics of a financial asset, was first transformed into a convection-diffusion…
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…
In this paper, we price European Call three different option pricing models, where the volatility is dynamically changing i.e. non constant. In stochastic volatility (SV) models for option pricing a closed form approximation technique is…
This work studies the valuation of currency options in markets suffering from a financial crisis. We consider a European option where the underlying asset is a foreign currency. We assume that the value of the underlying asset is a…
In this paper we introduce a new approach to model-free path-dependent option pricing. We first introduce a general duality result for linear optimisation problems over signed measures introduced in [3] and show how the the problem of…
We propose a versatile Monte-Carlo method for pricing and hedging options when the market is incomplete, for an arbitrary risk criterion (chosen here to be the expected shortfall), for a large class of stochastic processes, and in the…
European options can be priced by solving parabolic partial(-integro) differential equations under stochastic volatility and jump-diffusion models like Heston, Merton, and Bates models. American option prices can be obtained by solving…
The Constant Elasticity of Variance (CEV) model significantly outperforms the Black-Scholes (BS) model in forecasting both prices and options. Furthermore, the CEV model has a marked advantage in capturing basic empirical regularities such…
With the rapid advancement of neural networks, methods for option pricing have evolved significantly. This study employs the Black-Scholes-Merton (B-S-M) model, incorporating an additional variable to improve the accuracy of predictions…
This paper investigates analytic properties of American option prices under the finite moment log-stable (FMLS) model. Under this model the price of American options is characterised by the free boundary problem of a fractional partial…
We investigate the relation between the fair price for European-style vanilla options and the distribution of short-term returns on the underlying asset ignoring transaction and other costs. We compute the risk-neutral probability density…
The paper investigates the performance of the European option price when the log asset price follows a rich class of Generalized Tempered Stable (GTS) distribution. The GTS distribution is an alternative to Normal distribution and…
The paper focuses on pricing European-style options on several underlying assets under the Black-Scholes model represented by a nonstationary partial differential equation. The proposed method combines the Galerkin method with…
In this paper, we derive the price of a European call option of an asset following a normal process assuming stochastic volatility. The volatility is assumed to follow the Cox Ingersoll Ross (CIR) process. We then use the fast Fourier…
Option valuation problems are often solved using standard Monte Carlo (MC) methods. These techniques can often be enhanced using several strategies especially when one discretizes the dynamics of the underlying asset, of which we assume…
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…
In a stochastic volatility framework, we find a general pricing equation for the class of payoffs depending on the terminal value of a market asset and its final quadratic variation. This allows a pricing tool for European-style claims…
The literature on volatility modelling and option pricing is a large and diverse area due to its importance and applications. This paper provides a review of the most significant volatility models and option pricing methods, beginning with…
Option contracts can be valued by using the Black-Scholes equation, a partial differential equation with initial conditions. An exact solution for European style options is known. The computation time and the error need to be minimized…