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Modeling Vanilla Option prices: A simulation study by an implicit method
[article]
2014
arXiv
pre-print
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In this paper, the authors have solved the Black-Scholes equation by employing a reasonably accurate implicit method. Options with known analytic solutions have been evaluated. ...
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 simulation study results in obtaining/fixing the price of a European option with given agreed prices for Call and put options respectively. ...
arXiv:1311.0438v2
fatcat:hz5nkxuwyzegpjfsp57c7dfz5a
Calibration of Local-Stochastic and Path-Dependent Volatility Models to Vanilla and No-Touch Options
[article]
2019
arXiv
pre-print
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We propose a generic calibration framework to both vanilla and no-touch options for a large class of continuous semi-martingale models. ...
We detail a step-by-step procedure for a Heston-type local-stochastic volatility model with local vol-of-vol, as well as two path-dependent volatility models where the local volatility component depends ...
Pricing vanilla options Here, we explain how prices of vanilla contracts can be obtained efficiently as a by-product of the solution of the forward PIDE (2.10) for barrier options. ...
arXiv:1911.00877v1
fatcat:m55vl367lbglblvbjrq5jcdoju
Pricing growth-indexed bonds
2006
Journal of Banking & Finance
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In an effort to reduce such concerns, this article presents a simple way of pricing growth-indexed bonds. ...
As a pleasant by-product, the analysis tracks the quantitative implications of an increase in the share of growth-indexed bonds in total debt, measuring the ensuing decline in the probability of default ...
We thus accept market participants' views at face value and develop a simple method to price growthindexed bonds.
C. Is a Pricing Model Really Required, and Who Should Develop it? ...
doi:10.1016/j.jbankfin.2006.06.007
fatcat:c4jiedcdo5cb5oklt67uggmybu
Pricing Growth-Indexed Bonds
2005
IMF Working Papers
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In an effort to reduce such concerns, this article presents a simple way of pricing growth-indexed bonds. ...
As a pleasant by-product, the analysis tracks the quantitative implications of an increase in the share of growth-indexed bonds in total debt, measuring the ensuing decline in the probability of default ...
We thus accept market participants' views at face value and develop a simple method to price growthindexed bonds.
C. Is a Pricing Model Really Required, and Who Should Develop it? ...
doi:10.5089/9781451862355.001
fatcat:tsovh3fm65gyxh3fpfas4stn64
Analytic Approximation of Finite-Maturity Timer Option Prices
2014
Journal of futures markets
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We develop an approximation technique for pricing finite-maturity timer options under Heston-like stochastic volatility models. ...
By approximating the distributions of the accumulated variance and the random variance budget exceeding time, we obtain analytic expressions for timer option prices under zero correlation. ...
For nonzero correlation, we take a simple approach by assuming that the finite-maturity timer option price is a linear combination of the corresponding perpetual timer option and plain-vanilla option prices ...
doi:10.1002/fut.21659
fatcat:7ky6sdccgvgijjodsycig4z5wi
Pricing convertible bonds with call protection
2011
Journal of Computational Finance
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In this paper we deal with the issue of pricing numerically by simulation convertible bonds. A convertible bond can be seen as a coupon-paying and callable American option. ...
Deterministic pricing schemes are then ruled out by the curse of dimensionality, and simulation methods appear to be the only viable alternative. ...
by the simulation method of section 5.2.2. ...
doi:10.21314/jcf.2011.258
fatcat:tmqinkgpsvehnfskwnhof2gioe
Jumps and stochastic volatility in crude oil prices and advances in average option pricing
2016
Quantitative finance (Print)
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Finally, Ewald et al. (2013) propose a solution by means of a PDE and a Monte Carlo simulation method, whereas Yamazaki (2014) a pricing formula based on the Gram-Charlier expansion. ...
→ ∞), or an Asian option with a large finite number of monitoring dates (0 ≪ N < ∞) whose pricing by direct implementation of our method could be computationally demanding. ...
doi:10.1080/14697688.2016.1211798
fatcat:t23hvbz7h5gppgmr5z2p62kvcm
Comparison of Numerical Methods for Option Pricing
2006
Social Science Research Network
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This study goes through a range of methods for option pricing. ...
Chapter 6 cites Monte Carlo simulation as it was first introduced for option pricing, by Boyle (1976), and the Least Squares Monte Carlo simulation algorithm as it was introduced by Longstaff and Schwartz ...
This study will cover in extend the work done by Longstaff and Schwartz, and Stentoft. ...
doi:10.2139/ssrn.1093408
fatcat:2cxldvqzgfdqnlftzd2suykmpm
Forward deterministic pricing of options using Gaussian radial basis functions
2018
Journal of Computational Science
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a competitive forward pricing method. ...
The price of a fixed-term option is the expected value of the payoff at the time of maturity. ...
We refer to the option defined by (10) as a vanilla option and the option defined by (11) as a barrier option. ...
doi:10.1016/j.jocs.2017.05.016
fatcat:gjn4y7uqh5dyvp7huasdmlbgdu
Pricing commodity swing options
[article]
2020
arXiv
pre-print
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We implement the numerical problem by means of a least-square Monte Carlo simulation and we investigate alternative approaches based on reinforcement learning algorithms. ...
In this paper we focus on the natural gas market and we present a dynamical model for commodity futures prices able to calibrate liquid market quotes and to imply the volatility smile for futures contracts ...
11 : An episode is a simulation of the state up to the swing option maturity. ...
arXiv:2001.08906v1
fatcat:bsg372cbbzcbpmz7ne34xvah7u
Pricing of Fixed-Strike Lookback Options on Assets with Default Risk
2019
Mathematical Problems in Engineering
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Furthermore, we analyze the values of the vulnerable fixed-strike lookback options with respect to the model parameters and also show that the Monte Carlo simulations and the Implicit Finite Difference ...
Using double Mellin transforms and the method of images, we have a closed-form solution to fixed-strike lookback options with a default risk. ...
Dai and Chiu [3] studied a closed formula of vulnerable European options by taking advantage of a first passage model, and Hung and Liu [4] studied the pricing of vulnerable options when the market ...
doi:10.1155/2019/8412698
fatcat:wod233ifjrfwnbakboaljcoq4i
Supervised Deep Neural Networks (DNNs) for Pricing/Calibration of Vanilla/Exotic Options Under Various Different Processes
[article]
2019
arXiv
pre-print
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We demonstrate that deep neural networks exponentially expedite option pricing compared to commonly used option pricing methods which consequently make calibration and parameter estimation super fast. ...
We apply supervised deep neural networks (DNNs) for pricing and calibration of both vanilla and exotic options under both diffusion and pure jump processes with and without stochastic volatility. ...
RNN
Pricing Model/Method Transform Techniques
PDEs/PIDEs
MC simulation
DNN
model
vanilla weak exotic vanilla weak exotic vanilla weak exotic vanilla weak exotic
GBM
×
VG
×
GBMSA
×
? ...
arXiv:1902.05810v1
fatcat:6s2utkvt3vhkvntvbtq272wtpi
Option Pricing of Twin Assets
[article]
2014
arXiv
pre-print
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From here, a method to measure the level of similarity between assets is proposed, and secondly, an option pricing model of twin assets is developed. ...
The proposed model allows us to price an option of one nontraded asset using its twin asset, but this time knowing explicitly what levels of errors we are facing. ...
In section 2, firstly, a method to measure the level of similarity between assets is proposed, and secondly, an option pricing model of twin assets is developed. ...
arXiv:1401.6735v1
fatcat:m5wunvydvfdnzoc4yiumfiq4dm
Multiplicative noise, fast convolution and pricing
2012
Quantitative finance (Print)
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2011 pre-print arXiv:1107.1451v1 fatcat:4q6cwjzxabfzpjovr63sg5u674
Since exact analytical results are missing, we exploit the fast convolution as a numerical method alternative to the Monte Carlo simulation both in objective and risk neutral settings. ...
The ability in reproducing statistical features of financial return time series, such as thickness of the tails and scaling properties, makes this processes appealing for option pricing. ...
Being an interesting hybrid between a geometric Brownian motion and a stochastic volatility model, the latter provides a realistic description of the dynamics implied in the option market. ...
doi:10.1080/14697688.2012.729857
fatcat:iubfrv56azcfpn65qevxxkmiry
GDP Linked Bonds: Contract Design and Pricing
2008
Social Science Research Network
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The model allows us to obtain prices and default profiles for vanilla bonds and various GDP linked structures that could be issued by emerging market sovereigns. ...
We study four types of growth linked bonds: their default term structures, cash flow profiles, pricing under different assumptions about investor risk aversion and behaviour against an assortment of macroeconomic ...
Using Monte-Carlo simulations, the model allows us to obtain prices and default profiles for vanilla bonds and various GDP linked structures that could be issued by an emerging market sovereign. ...
doi:10.2139/ssrn.1102236
fatcat:z3sabtbb4vbbxfzqo5l7ey2jqi
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