A locally-built, LLM-digested index of recent arXiv papers in quant finance, geometry/topology, and statistical ML — keyword search served straight from SQLite on this machine.
The paper analyzes short maturity Asian options using large deviations theory.
Study short maturity Asian options in jump-diffusion models with local volatility.
Study short-maturity VIX and European option prices with jumps.
We present a rigorous study of the short maturity asymptotics for Asian options with continuous-time averaging, under the assumption that the underlying asset follows the Constant Elasticity of Variance (CEV) model. We present an analytical approximation for the Asian options prices which has the appropriate short matu…
Asymptotic analysis of short-maturity options on realized variance in local-stochastic volatility models.
This paper discusses the short-maturity behavior of Asian option prices and hedging portfolios. We consider the risk-neutral valuation and the delta value of the Asian option having a Hölder continuous payoff function in a local volatility model. The main idea of this analysis is that the local volatility model can be …
Study short-term behavior of up-and-in barrier options using Malliavin calculus.
Study shows non-convergence of short-maturity expansion in SABR model.
Study short-maturity Asian option pricing in LSV models using large deviations theory.
New asymptotic formula for option prices with interest rates and dividend yield effects.
We consider the fractional Heston model originally proposed by Comte, Coutin and Renault. Inspired by recent ground-breaking work on rough volatility, which showed that models with volatility driven by fractional Brownian motion with short memory allows for better calibration of the volatility surface and more robust e…
We correct a mistake in the published version of our paper. Our new conclusion is that the "implied leverage effect" for single stocks is underestimated by option markets for short maturities and overestimated for long maturities, while it is always overestimated for OEX options, except for the shortest maturities wher…
A machine learning method for short-maturity options with jumps and stochastic volatility.
Derives a rough SABR formula for short maturities.
A major drawback of the Standard Heston model is that its implied volatility surface does not produce a steep enough smile when looking at short maturities. For that reason, we introduce the Stationary Heston model where we replace the deterministic initial condition of the volatility by its invariant measure and show,…
We consider the at-the-money strike derivative of implied volatility as the maturity tends to zero. Our main results quantify the behavior of the slope for infinite activity exponential Lévy models including a Brownian component. As auxiliary results, we obtain asymptotic expansions of short maturity at-the-money digit…
This paper proposes a Monte Carlo technique for pricing the forward yield to maturity, when the volatility of the zero-coupon bond is known. We make the assumption of deterministic default intensity (Hazard Rate Function). We make no assumption on the volatility of the yield. We actually calculate the initial value of …
The paper examines the short-time implied volatility of additive processes and finds key parameters.
We invert the Black-Scholes formula. We consider the cases low strike, large strike, short maturity and large maturity. We give explicitly the first 5 terms of the expansions. A method to compute all the terms by induction is also given. At the money, we have a closed form formula for implied lognormal volatility in te…
Study asset price bubbles in markets with short sales prohibitions and model uncertainty.
This paper optimizes importance sampling for rare-event options pricing under the Heston model.
We propose a multifractal model for short-term interest rates. The model is a version of the Markov-Switching Multifractal (MSM), which incorporates the well-known level effect observed in interest rates. Unlike previously suggested models, the level-MSM model captures the power-law scaling of the structure functions a…
We present a rigorous study of the short maturity asymptotics for Asian options with continuous-time averaging, under the assumption that the underlying asset follows a local volatility model. The asymptotics for out-of-the-money, in-the-money, and at-the-money cases are derived, considering both fixed strike and float…
We propose a randomised version of the Heston model-a widely used stochastic volatility model in mathematical finance-assuming that the starting point of the variance process is a random variable. In such a system, we study the small-and large-time behaviours of the implied volatility, and show that the proposed random…
Unified model for equity option pricing and interest-rate risk assessment.
The definition of deposit substitutes in Philippine tax law fails to consider the maturity of a debt instrument. This makes it possible for long-term bonds to be considered as deposit substitutes if they meet the 20-lender rule, taxable at 20% final tax. However, long-term debt instruments cannot realistically function…
We study the short-time asymptotics of conditional expectations of smooth and non-smooth functions of a (discontinuous) Ito semimartingale; we compute the leading term in the asymptotics in terms of the local characteristics of the semimartingale. We derive in particular the asymptotic behavior of call options with sho…
Study finds a small correction to Asian option volatility.
We study the short maturity asymptotics for prices of forward start Asian options under the assumption that the underlying asset follows a local volatility model. We obtain asymptotics for the cases of out-of-the-money, in-the-money, and at-the-money, considering both fixed strike and floating Asian options. The expone…
Study on implied volatility of Asian options with stochastic volatility.
Study finds rough volatility models underperform in SPX option pricing.
Paper explores volatility swaps in rough volatility models.
This paper extends static hedging for European options over multiple maturities.
Study leading-order asymptotics for VIX option prices in Bergomi models.
The paper analyzes implied volatility for European and Asian options under stochastic volatility Bachelier model.
Exact relationships found between ATM slope, volatility swap, and zero vanna.
We give conditions under which the normalized marginal distribution of a semimartingale converges to a Gaussian limit law as time tends to zero. In particular, our result is applicable to solutions of stochastic differential equations with locally bounded and continuous coefficients. The limit theorems are subsequently…
This paper studies the dynamics of Brazilian interest rates for short-term maturities. The paper employs developed techniques in the econophysics literature and tests for long-range dependence in the term structure of these interest rates for the last decade. Empirical results suggest that the degree of long-range depe…
Pricing formulae for defaultable corporate bonds with discrete coupons under consideration of the government taxes in the united model of structural and reduced form models are provided. The aim of this paper is to generalize the comprehensive structural model for defaultable fixed income bonds (considered in [1]) into…
Derives short-term option pricing asymptotics in local-stochastic volatility models.
Study improves caplet calibration for 1Y maturity using different models.
In fixed income sector, the yield curve is probably the most observed indicator by the market for trading and fifinancing purposes. A yield curve plots interest rates across different contract maturities from short end to as long as 30 years. For each currency, the corresponding curve shows the relation between the lev…
Perpetual futures offer leverage without maturity, with prices influenced by funding rates.
It has been recently shown that spot volatilities can be very well modeled by rough stochastic volatility type dynamics. In such models, the log-volatility follows a fractional Brownian motion with Hurst parameter smaller than 1/2. This result has been established using high frequency volatility estimations from histor…
Study on implied volatility of Inverse options under stochastic volatility models.
A new model for pricing ultra-short-term options with complex volatility patterns.
We develop a generalization of the Black-Cox structural model of default risk. The extended model captures uncertainty related to firm's ability to avoid default even if company's liabilities momentarily exceeding its assets. Diffusion in a linear potential with the radiation boundary condition is used to mimic a compa…
Study on VIX options pricing in SABR model, showing infinite prices due to volatility explosion.