This paper proposes a new approximation formula for pricing average options on commodities under a stochastic volatility environment. In particular, it derives an option pricing formula under Heston and an extended λ-SABR stochastic volatility models (which includes an extended SABR model as...

We shall propose a new computational scheme with the asymptotic method to achieve variance reduction of Monte Carlo simulation for numerical analysis especially in finance. We not only provide general scheme of our method, but also show its effectiveness through numerical examples such as...

This paper presents a new approximation formula for pricing swaptions and caps/floors under the Libor market model of interest rates (LMM) with the local and affine-type stochastic volatility. In particular, two approximation methods are applied in pricing, one of which is so called...

This paper provides a new hedge fund replication method, which extends Kat and Palaro (2005) and Papageorgiou, Remillard and Hocquard (2008) to multiple trading assets with both long and short positions. The method generates a target payoff distribution by the cheapest dynamic portfolio. It is...

This paper proposes a continuous-time term-structure model under stochastic differential utility with non-unitary elasticity of intertemporal substitution (EIS, henceforth) in a representative-agent endowment economy with mean-reverting expectations on real output growth and inflation. Using...

We developed a new scheme for computing "Greeks"of derivatives by an asymptotic expansion approach. In particular, we derived analytical approximation formulae for deltas and vegas of plain vanilla and average call options under general Markovian processes of underlying asset prices. We also...

This paper proposes a new approach to style analysis by utilizing a general state space model and Monte Carlo filter. In particular,We regard coefficients of style indices as state variables in the state space model and apply Monte Carlo filter as estimation method. Moreover, an empirical...

This paper studies the probability distribution and option pricing for drawdown in a stochastic volatility environment. Their analytical approximation formulas are derived by the application of a singular perturbation method (Fouque et al. [7]). The mathematical validity of the approximation is...

This paper reviews an asymptotic expansion approach to numerical problems for pricing financial assets and securities.

We developed a variance reduction method of Monte Carlo simulations as well as an approximation formula based on an asymptotic expansion approach for pricing bond options and swaptions in HJM framework. As a numerical example we applied the technique to a realistic two-factor model and confirmed...