The paper proposes a novel direction to rationalize and quantify investors' flipping behavior and its effect on underpricing in IPOs through the use of a structural approach mode. The outcome is a proxy value that replicates investors' flipping behavior. When tested empirically, the model...

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 develop the algorithmic approach for Counterparty exposure calculation and automate its application to arbitrary complicated instruments. Assuming that the portfolio is priced by the backward (American) Monte-Carlo method, our approach allows calculating the credit exposure as a pricing...

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...

We show that if the discounted Stock price process is a continuous martingale, then there is a simple relationship linking the variance of the terminal Stock price and the variance of its arithmetic average. We use this to establish a model-independent upper bound for the price of a continuously...

In this paper we prove an approximate formula expressed in terms of elementary functions for the implied volatility in the Heston model. The formula consists of the constant and first order terms in the large maturity expansion of the implied volatility function. The proof is based on...

In this paper, we present advanced analytical formulas for SABR model option pricing. The first technical result consists of a new exact formula for the zero correlation case. This closed form is a simple 2D integration of elementary functions, particularly attractive for numerical...

In this paper we investigate the use of finite difference and finite element schemes when applied to the valuation of exotic options characterized by discontinuities in the payoff function. In particular, we will conduct a numerical analysis of several common schemes in order to give a better...

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...