Asset price processes are completely described by information processes and investors´ preferences. In this paper we derive the relationship between the process of investors´ expectations of the terminal stock price and asset prices in a general continous time pricing kernel framework. To...

We introduce a novel numerical framework for pricing American options in high dimensions. Our scheme manages to alleviate the problem of dimension scaling through the use of adaptive sparse grids. We approximate the value function with a low number of points and recursively apply fast...

We use the Itô Decomposition Formula (see Alòs (2012)) to express certain conditional expectations as exponentials of iterated integrals. As one application, we compute an exact formal expression for the leverage swap for any stochastic volatility model expressed in forward variance form. As...