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Itô-Taylor Expansion Method of European Spread Option Pricing for Multivariate Diffusions with Jumps
In this paper, we propose a new method for spread option pricing under the multivariate irreducible diffusions without jumps and with different types...
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Counterparty risk valuation on credit-linked notes under a Markov Chain framework
A credit-linked note (CLN) is a note paying an enhanced coupon to investors for bearing the credit risk of a reference entity. In this paper, we...
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Fast Laplace transform methods for the PDE system of Parisian and Parasian option pricing
This paper develops a fast Laplace transform method for solving the complex PDE system arising from Parisian and Parasian option pricing. The value...
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Solution of option pricing equations using orthogonal polynomial expansion
We study both analytic and numerical solutions of option pricing equations using systems of orthogonal polynomials. Using a Galerkin-based method, we...
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Pricing VIX options with stochastic skew and asymmetric jumps
This paper performs several empirical exercises to provide evidence that the stochastic skew behavior and asymmetric jumps exist in VIX markets. In...
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An approximation formula for the price of credit default swaps under the fast-mean reversion volatility model
We consider the pricing of credit default swaps (CDSs) with the reference asset assumed to follow a geometric Brownian motion with a fast...
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Series representAtion of the Pricing Formula for the EuropeaN Option Driven by Space-Time Fractional Diffusion
In this paper, we show that the price of an European call option, whose underlying asset price is driven by the space-time fractional diffusion, can...
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A fixed point method for the linear complementarity problem arising from american option pricing
For American option pricing, the Black-Scholes-Merton model can be discretized as a linear complementarity problem (LCP) by using some finite...
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Modeling of Financial Processes with A Space-Time Fractional Diffusion Equation of Varying Order
In this paper, a new model for financial processes in form of a space-time fractional diffusion equation of varying order is introduced, analyzed,...
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A delayed stochastic volatility correction to the constant elasticity of variance model
The Black-Scholes model does not account non-Markovian property and volatility smile or skew although asset price might depend on the past movement...
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Option prices under liquidity risk as weak solutions of semilinear diffusion equations
Prices of financial options in a market with liquidity risk are shown to be weak solutions of a class of semilinear parabolic partial differential...
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Lattice Boltzmann methods for solving partial differential equations of exotic option pricing
This paper establishes a lattice Boltzmann method (LBM) with two amending functions for solving partial differential equations (PDEs) arising in...
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Small-Maturity Digital Options in Lévy Models: An Analytic Approach*
We prove a small-time Tauberian theorem for transition probabilities of certain Lévy processes. The main assumption is a condition on the asymptotic...
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The rate of convergence of option prices on the asset following a geometric Ornstein–Uhlenbeck process
The paper contains a discrete approximation scheme for the price of asset modeled by a geometric Ornstein–Uhlenbeck process. The idea is to consider...
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Optimal partial hedging of an American option: shifting the focus to the expiration date
As a main contribution we present a new approach for studying the problem of optimal partial hedging of an American contingent claim in a finite and...
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Approximations and asymptotics of upper hedging prices in multinomial models
We give an exposition and numerical studies of upper hedging prices in multinomial models from the viewpoint of linear programming and the...
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On pricing and hedging in financial markets with long-range dependence
We study a mixed financial market with risky asset governed by both the standard Brownian motion and the fractional Brownian motion with Hurst index
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A Framework for Dynamic Hedging under Convex Risk Measures
We consider the problem of minimizing the risk of a financial position (hedging) in an incomplete market. It is well known that the industry standard...
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Cross hedging with stochastic correlation
This paper is concerned with the study of quadratic hedging of contingent claims with basis risk. We extend existing results by allowing the...