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Deep local volatility
Chataigner, Marc; Crépey, Stéphane; Dixon, Matthew F. - In: Risks : open access journal 8 (2020) 3/82, pp. 1-18
subsequent local volatility surface is never considered. In this article, we develop a deep learning approach for interpolation … performance. A novel component is the use of the Dupire formula to enforce bounds on the local volatility associated with option …
Persistent link: https://www.econbiz.de/10012293261
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Pricing options and computing implied volatilities using neural networks
Liu, Shuaiqiang; Oosterlee, Cornelis Willebrordus; … - In: Risks : open access journal 7 (2019) 1/16, pp. 1-22
stochastic volatility model and Brent’s iterative root-finding method for the calculation of implied volatilities. The numerical …
Persistent link: https://www.econbiz.de/10012016033
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On the stochastic volatility in the generalized Black-Scholes-Merton model
Ivanov, Roman V. - In: Risks : open access journal 11 (2023) 6, pp. 1-23
This paper discusses the generalized Black-Scholes-Merton model, where the volatility coefficient, the drift … that the volatility, the drift, and the interest rate depend on a gamma or inverse-gamma random variable. This model …
Persistent link: https://www.econbiz.de/10014335849
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Option pricing and portfolio optimization under a multi-asset jump-diffusion model with systemic risk
Makarov, Roman - In: Risks : open access journal 11 (2023) 12, pp. 1-24
We explore a multi-asset jump-diffusion pricing model, combining a systemic risk asset with several conditionally independent ordinary assets. Our approach allows for analyzing and modeling a portfolio that integrates high-activity security, such as an exchange trading fund (ETF) tracking a...
Persistent link: https://www.econbiz.de/10014446758
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Effect of variance swap in hedging volatility risk
Shen, Yang - In: Risks : open access journal 8 (2020) 3/70, pp. 1-34
This paper studies the effect of variance swap in hedging volatility risk under the mean-variance criterion. We … consider two mean-variance portfolio selection problems under Heston's stochastic volatility model. In the first problem, the … variance swap can be used to hedge against the volatility risk. In the second problem, only the bank account and the stock can …
Persistent link: https://www.econbiz.de/10012293125
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Options with extreme strikes
Zhu, Lingjiong - In: Risks : open access journal 3 (2015) 3, pp. 234-249
In this short paper, we study the asymptotics for the price of call options for very large strikes and put options for very small strikes. The stock price is assumed to follow the Black-Scholes models. We analyze European, Asian, American, Parisian and perpetual options and conclude that the...
Persistent link: https://www.econbiz.de/10011300319
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Improving convergence of binomial schemes and the Edgeworth expansion
Bock, Alona; Korn, Ralf - In: Risks : open access journal 4 (2016) 2, pp. 1-22
Binomial trees are very popular in both theory and applications of option pricing. As they often suffer from an irregular convergence behavior, improving this is an important task. We build upon a new version of the Edgeworth expansion for lattice models to construct new and quickly converging...
Persistent link: https://www.econbiz.de/10011507486
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Joshi's split tree for option pricing
Leduc, Guillaume; Hot, Merima Nurkanovic - In: Risks : open access journal 8 (2020) 3/81, pp. 1-26
In a thorough study of binomial trees, Joshi introduced the split tree as a two-phase binomial tree designed to minimize oscillations, and demonstrated empirically its outstanding performance when applied to pricing American put options. Here we introduce a "flexible" version of Joshi's tree,...
Persistent link: https://www.econbiz.de/10012293258
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A ne on simulation pricing of π-options
Palmowski, Zbigniew; Serafin, Tomasz - In: Risks : open access journal 8 (2020) 3/90, pp. 1-19
In this work, we adapt a Monte Carlo algorithm introduced by Broadie and Glasserman in 1997 to price a π-option. This method is based on the simulated price tree that comes from discretization and replication of possible trajectories of the underlying asset's price. As a result, this algorithm...
Persistent link: https://www.econbiz.de/10012293283
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Optimal stopping and utility in a simple modelof unemployment insurance
Anquandah, Jason S.; Bogachev, Leonid V. - In: Risks : open access journal 7 (2019) 3/94, pp. 1-41
Managing unemployment is one of the key issues in social policies. Unemployment insurance schemes are designed to cushion the financial and morale blow of loss of job but also to encourage the unemployed to seek new jobs more proactively due to the continuous reduction of benefit payments. In...
Persistent link: https://www.econbiz.de/10012126434