In this paper, we present our study on a hybrid stochastic volatility model incorporating local volatility for pricing options in the foreign exchange (FX) market. The hybrid stochastic-local volatility model (SLV) could match the implied volatility surface well and meanwhile shows the...

This thesis presents our study on using the hybrid stochastic-local volatility model for option pricing. Many researchers have demonstrated that stochastic volatility models cannot capture the whole volatility surface accurately, although the model parameters have been calibrated to replicate...

In this paper, we present our research on pricing window barrier options under a hybrid stochastic-local volatility (SLV) model in the foreign exchange (FX) market. Due to the hybrid effect of the local volatility and stochastic volatility components of the model, the SLV model can reproduce the...

In this paper, we present our study on using the hybrid stochastic-local volatility (SLV) model for option pricing. The SLV model contains a stochastic volatility component represented by a volatility process and a local volatility component represented by a so-called leverage function. The...

The aim of this paper is to show the benefit of applying a moment matching technique to the short leg component in order to price and hedge multi-asset spread options: in particular, we approximate the real dynamics of the short leg component by taking a log-normal proxy, whose equivalent...

In electricity markets globally, market participants and policymakers increasingly focus on integrating adjacent, yet separate market areas via cross-border trade in electricity. Based on a discussion of the institutional framework for organizing cross-border trade, this paper analyzes how spot...

Increasing interconnectivity between electricity wholesale markets requires an efficient allocation scheme in order to provide access to scarce cross-border transmission capacities. The explicit schemes have primarily induced economically inefficient interconnector use given that flows have to...

In this paper, we present our study on using the GPU to accelerate the computation in pricing financial options. We first introduce the GPU programming and the SABR stochastic volatility model. We then discuss pricing options with quasi-Monte Carlo techniques under the SABR model. In particular,...

We build on of the work of Henry-Labordµere and Lewis on the small-time behaviour of the return distribution under a general local-stochastic volatility model with zero correlation. We do this using the Freidlin-Wentzell theory of large deviations for stochastic differential equations, and then...

Using the Gartner-Ellis theorem from large deviation theory, we characterize the leading-order behaviour of call option prices under the Heston model, in a new regime where the maturity is large and the log-moneyness is also proportional to the maturity. Using this result, we then derive the...