We propose a way to compute the hedging Delta using the Malliavin weight method. Our approach, which we name the l-method, generally outperforms the standard Monte Carlo finite difference method, especially for discontinuous payoffs. Furthermore, our approach is nonparametric, as we only assume...

Inspired by the article Weak Convergence Rate of a Time-Discrete Scheme for the Heston Stochastic Volatility Model, Chao Zheng, SIAM Journal on Numerical Analysis 2017, 55:3, 1243-1263, we studied the weak error of discretization schemes for the Heston model, which are based on exact simulation...

We study a discrete time hedging and pricing problem in a market with the liquidity risk. We consider a discrete version of the constant elasticity of variance (CEV) model by applying Leland's discrete time replication scheme. The pricing equation becomes a nonlinear partial differential...

We present general conditions for the weak convergence of a discrete-time additive scheme to a stochastic process with memory in the space D [ 0,T ]. Then we investigate the convergence of the related multiplicative scheme to a process that can be interpreted as an asset price with memory. As an...