A general framework for pricing of real options in continuous time for wide classes of payoff streams that are monotone functions of a Levy process is provided. Exercise rules are formulated in terms of statistics of record-setting low payoffs and can be viewed as an extension of Bernanke's bad...

We derive explicit formulas for time decay, for the European call and put options at expiry, and use them to calculate analytical approximations to the price of the American put and early exercise boundary near expiry. We show that for many families of non-Gaussian processes used in empirical...

The non-gaussianity of processes observed in financial markets and relatively good performance of gaussian models can be reconciled by replacing the Brownian motion with Levy processes whose Levy densities exhibit exponential decay, and the rate of decay is large. This leads to asymptotic...

We solve the pricing problem for perpetual American puts and calls on dividend-paying assets. The dependence of a dividend process on the underlying stochastic factor is fairly general: any non-decreasing function is admissible. The stochastic factor follows a Levy process. This specification...

For wide classes of put-like and call-like perpetual options under Levy processes satisfying the (ACP)-property, the optimal exercise price and rational option price are found. The results are formulated in terms of resolvent operators of the supremum and infimum processes, which are natural...

In this paper, we argue that, once the costs of maintaining the hedging portfolio are properly taken into account, semi-static portfolios should more properly be thought of as separate classes of derivatives, with non-trivial, model-dependent payoff structures. We derive new integral...

We describe a fast new method for the market implied calibration of the Heston (1993) model for equity, based on an improved version of the parabolic pricing algorithm of Levendorskii (2012). This pricing method, when used in the calibration, is much faster and more accurate, and better...

For wide classes of payoff functions and Lévy processes, we solve perpetual restricted optimal stopping problems, when one exercise region is exogenously given (barrier like feature), and the other is chosen to optimize the option value, and straddle-like perpetual options, when the optimal...

Recently, the advantages of conformal deformations of the contours of integration in pricing formulas were demonstrated in the context of wide classes of L'evy models and the Heston model. In the present paper we construct efficient conformal deformations of the contours of integration in the...

In the standard optimal stopping problems, actions are artificially restricted to the moments of observations of costs or benefits. In the standard experimentation and learning models based on two-armed Poisson bandits, it is possible to take an action between two sequential observations. The...