Related papers: Volatility and dividend risk in perpetual American…
In the paper we consider the problem of valuation of American options written on dividend-paying assets whose price dynamics follow the classical multidimensional Black and Scholes model. We provide a general early exercise premium…
It is well known that in models with time-homogeneous local volatility functions and constant interest and dividend rates, the European Put prices are transformed into European Call prices by the simultaneous exchanges of the interest and…
Using a fast numerical technique, we investigate a large database of investor suboptimal non-exercise of short maturity American call options on dividend-paying stocks listed on the Dow Jones. The correct modelling of the discrete dividend…
We consider as given a discrete time financial market with a risky asset and options written on that asset and determine both the sub- and super-hedging prices of an American option in the model independent framework of ArXiv:1305.6008. We…
We investigate pricing-hedging duality for American options in discrete time financial models where some assets are traded dynamically and others, e.g. a family of European options, only statically. In the first part of the paper we…
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…
This paper examines a semi-analytical approach for pricing American options in time-inhomogeneous models characterized by negative interest rates (for equity/FX) or negative convenience yields (for commodities/cryptocurrencies). Under such…
We introduce a modular framework that extends the signature method to handle American option pricing under evolving volatility roughness. Building on the signature-pricing framework of Bayer et al. (2025), we add three practical…
In this paper, we extend the 3/2-model for VIX studied by Goard and Mazur (2013) and introduce the generalized 3/2 and 1/2 classes of volatility processes. Under these models, we study the pricing of European and American VIX options and,…
This paper presents a derivation of the explicit price for the perpetual American put option time-capped by the first drawdown epoch beyond a predefined level. We consider the market in which an asset price is described by geometric L\'evy…
According to the volatility feedback effect, an unexpected increase in squared volatility leads to an immediate decline in the price-dividend ratio. In this paper, we consider the properties of stock price dynamics and option valuations…
Model risk arises from the misspecification of probabilistic models used for pricing and hedging derivatives. While model risk for European-style claims has been widely studied, much less attention has been given to American-style…
We study the valuation of an American put option with a random time horizon given by the last exit time of the underlying asset from a fixed level. Since this random time is not a stopping time, the problem falls outside the classical…
This paper proposes to model asset price dynamics with a mixture of diffusion processes where the instantaneous volatility of the underlying diffusion process contains a random vector. The marginal probability distributions of the proposed…
We derive explicit formulas for time decay, for the European call and put options at expiry, and use them to calculate analytical approximations to the price of the American put and early exercise boundary near expiry. We show that for many…
This paper mainly discusses the American option's hedging strategies via binomialmodel and the basic idea of pricing and hedging American option. Although the essential scheme of hedging is almost the same as European option, small…
We provided an analytical representation of the price of a barrier option with one type of special moving barrier. We consider the case that risk free rate, dividend rate and stock volatility are time dependent. We get a pricing formula and…
In this paper, we study a version of the perpetual American call/put option where exercise opportunities arrive only periodically. Focusing on the exponential L\'evy models with i.i.d. exponentially-distributed exercise intervals, we show…
This paper introduces a semi-analytical method for pricing American options on assets (stocks, ETFs) that pay discrete and/or continuous dividends. The problem is notoriously complex because discrete dividends create abrupt price drops and…
This paper presents a derivation of the explicit price for the perpetual American put option in the Black-Scholes model, time-capped by the first drawdown epoch beyond a predefined level. We demonstrate that the optimal exercise strategy…