Technical paper/Option pricing
American options: time-critical pricing
Time constraints can be binding for ‘heavy’ Monte Carlo calculations of risk analytics – value-at-risk, potential future exposure, credit valuation adjustment – in intraday risk monitoring, so fast approximations are sometimes preferred. Vladislav…
Quantized calibration in local volatility
Quantization is applied to price vanilla and barrier options
Funding in option pricing: the Black-Scholes framework extended
Wujiang Lou shows the impact of funding costs on option valuation
Heston model: shifting on the volatility surface
Stochastic volatility model combining Heston vol model and CIR++
Cutting edge: Incorporating forex volatility into commodity spread option pricing
Spread option pricing: importance of forex risk factors illustrated
Smile transformation for price prediction
Prediction of arbitrage-free option prices that outperform existing models
Time for a timer
Time for a timer
Hedge backtesting for model validation
Hedge backtesting for model validation
Smile in the low moments
Smile in the low moments
Rational shapes of local volatility
Rational shapes of local volatility
Quanto adjustments in the presence of stochastic volatility
Quanto adjustments in the presence of stochastic volatility
Stochastic volatility’s orderly smiles
Stochastic volatility’s orderly smiles
Downgrade termination costs
Downgrade termination costs
Cutting Edge introduction: requiem for a probabilist
Requiem for a probabilist
Perturbed Gaussian copula: introducing the skew effect in co-dependence
Perturbed Gaussian copula: introducing the skew effect in co-dependence
Being particular about calibration
Following previous work on the calibration of multi-factor local stochastic volatility models to market smiles, Julien Guyon and Pierre Henry-Labordère show how to calibrate exactly any such model. Their approach, based on McKean’s particle method,…
Repricing the cross smile: an analytic joint density
Repricing the cross smile: an analytic joint density