相关论文: Holder-extendible European option: corrections and…
We study the set of marginal utility-based prices of a financial derivative in the case where the investor has a non-replicable random endowment. We provide an example showing that even in the simplest of settings - such as Samuelson's…
Option pricing is an integral part of modern financial risk management. The well-known Black and Scholes (1973) formula is commonly used for this purpose. This paper is an attempt to extend their work to a situation in which the…
We study the pricing of derivative securities in financial markets modeled by a sub-mixed fractional Brownian motion with jumps (smfBm-J), a non-Markovian process that captures both long-range dependence and jump discontinuities. Under this…
The Black-Scholes implied volatility skew at the money of SPX options is known to obey a power law with respect to the time-to-maturity. We construct a model of the underlying asset price process which is dynamically consistent to the power…
In this paper the valuation problem of a European call option in presence of both stochastic volatility and transaction costs is considered. In the limit of small transaction costs and fast mean reversion, an asymptotic expression for the…
Put-call parity is a terminal-payoff identity, but its enforcement is capital-using. I study the carry gap, the annualized wedge between option-implied and OIS discount factors, in SPX and RUT index options. Quoted parity is tightly…
Finite difference approximations to multi-asset American put option price are considered. The assets are modelled as a multi-dimensional diffusion process with variable drift and volatility. Approximation error of order one quarter with…
Models to price long term loans in the securities lending business are developed. These longer horizon deals can be viewed as contracts with optionality embedded in them. This insight leads to the usage of established methods from…
In this article, we consider European options of type $h(X^1_T, X^2_T,\ldots, X^n_T)$ depending on several underlying assets. We study how such options can be valued in terms of simple vanilla options in non-specified market models. We…
We consider an insurance entity endowed with an initial capital and a surplus process modelled as a Brownian motion with drift. It is assumed that the company seeks to maximise the cumulated value of expected discounted dividends, which are…
We introduce a novel stochastic volatility model where the squared volatility of the asset return follows a Jacobi process. It contains the Heston model as a limit case. We show that the joint density of any finite sequence of log returns…
Exponential functionals of Brownian motion have been extensively studied in financial and insurance mathematics due to their broad applications, for example, in the pricing of Asian options. The Black-Scholes model is appealing because of…
In this article, we consider the small-time asymptotics of options on a \emph{Leveraged Exchange-Traded Fund} (LETF) when the underlying Exchange Traded Fund (ETF) exhibits both local volatility and jumps of either finite or infinite…
In this paper we study the pricing of exchange options when underlying assets have stochastic volatility and stochastic correlation. An approximation using a closed-form approximation based on a Taylor expansion of the conditional price is…
An option market maker incurs funding costs when carrying and hedging inventory. To hedge a net long delta inventory, for example, she pays a fee to borrow stock from the securities lending market. Because of haircuts, she posts additional…
We establish higher-order weighted Sobolev and Holder regularity for solutions to variational equations defined by the elliptic Heston operator, a linear second-order degenerate-elliptic operator arising in mathematical finance.…
We discuss a simple extension of the Ho and Lee model with generic time-dependent drift in which: 1) we compute bond prices analytically; 2) the yield curve is sensible and the asymptotic yield is positive; and 3) our analytical solution…
The mixed fractional Brownian motion ($mfBm$) has become quite popular in finance, since it allows one to model long-range dependence and self-similarity while remaining, for certain values of the Hurst parameter, arbitrage-free. In the…
This paper defines fractional Heston-type (fHt) model as an arbitrage-free financial market model with the infinitesimal return volatility described by the square of a single stochastic equation with respect to fractional Brownian motion…
We propose an option approach for pricing bond illiquidity that is reminiscent of the celebrated work of Longstaff (1995) on the non-marketability of some non-dividend-paying shares in IPOs. This approach describes a quite common situation…