We propose a fast and accurate numerical method for pricing European swaptions in multi-factor Gaussian term structure models. Our method can be used to accelerate the calibration of such models to the volatility surface. The pricing of an interest rate option in such a model involves evaluating...

The least square Monte Carlo (LSM) algorithm proposed by Longstaff and Schwartz (2001) is widely used for pricing American options. The LSM estimator contains undesirable look-ahead bias, and the conventional technique of removing it necessitates doubling simulations. We present the...

Contrary to the common view that exact pricing is prohibitive owing to the curse of dimensionality, this study proposes an efficient and unified method for pricing options under multivariate Black-Scholes-Merton (BSM) models, such as the basket, spread, and Asian options. The option price is...

Gulisashvili et al. [Quant. Finance, 2018, 18(10), 1753-1765] provide a small-time asymptotics for the mass at zero under the uncorrelated stochastic-alpha-beta-rho (SABR) model by approximating the integrated variance with a moment-matched lognormal distribution. We improve the accuracy of the...

This study presents new analytic approximations of the stochastic-alpha-beta-rho (SABR) model. Unlike existing studies that focus on the equivalent Black-Scholes (BS) volatility, we instead derive the equivalent constant-elasticity-of-variance (CEV) volatility. Our approach effectively reduces...

Exact simulation schemes under the Heston stochastic volatility model (e.g., Broadie-Kaya and Glasserman-Kim) suffer from computationally expensive Bessel function evaluations. We propose a new exact simulation scheme without the Bessel function, based on the observation that the conditional...