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.
Develops hedging formula in fractional model with costs.
Efficient numerical method for time-fractional Black-Scholes model.
Study prices currency options using fractional delta hedging with transaction costs.
Enhances option pricing with fractional order Black-Scholes-Merton model.
Derives an option-pricing formula for fractional markets with skew and smile.
We show how the prices of options can be determined with the help of double-fractional differential equation in such a way that their inclusion in a portfolio of stocks provides a more reliable hedge against dramatic price drops that the use of options whose prices were fixed by the Black-Scholes formula.
We construct a three-point compact finite difference scheme on a non-uniform mesh for the time-fractional Black-Scholes equation. We show that for special graded meshes used in finance, the Tavella-Randall and the quadratic meshes the numerical solution has a fourth-order accuracy in space. Numerical experiments are di…
Replacing Black-Scholes' driving process, Brownian motion, with fractional Brownian motion allows for incorporation of a past dependency of stock prices but faces a few major downfalls, including the occurrence of arbitrage when implemented in the financial market. We present the development, testing, and implementatio…
The paper analyzes option pricing under subdiffusive fractional Brownian motion.
We consider fractional Black-Scholes market with proportional transaction costs. When transaction costs are present, one trades periodically i.e. we have the discrete trading with equidistance between trading times. We derive a non trivial hedging error for a class of European options with convex payoff in the…
A new method for pricing options in subdiffusive models derived from finite differences.
An investor faced with a contingent claim may eliminate risk by perfect hedging, but as it is often quite expensive, he seeks partial hedging (quantile hedging or efficient hedging) that requires less capital and reduces the risk. Efficient hedging for European call option was considered in the standard Black-Scholes m…
The study examines hedging strategies in financial models with transaction costs.
Modified perturbation method removes non-smoothness in solving Black-Scholes equations.
We survey some new progress on the pricing models driven by fractional Brownian motion \cb{or} mixed fractional Brownian motion. In particular, we give results on arbitrage opportunities, hedging, and option pricing in these models. We summarize some recent results on fractional Black & Scholes pricing model with trans…
This paper develops a European option pricing formula for fractional market models. Although there exist option pricing results for a fractional Black-Scholes model, they are established without accounting for stochastic volatility. In this paper, a fractional version of the Constant Elasticity of Variance (CEV) model …
Paper applies subdiffusive dynamics to American and barrier options pricing.
Empirical studies show that the volatility may exhibit correlations that decay as a fractional power of the time offset. The paper presents a rigorous analysis for the case when the stationary stochastic volatility model is constructed in terms of a fractional Ornstein Uhlenbeck process to have such correlations. It is…
Based on criteria of mathematical simplicity and consistency with empirical market data, a stochastic volatility model is constructed, the volatility process being driven by fractional noise. Price return statistics and asymptotic behavior are derived from the model and compared with data. Deviations from Black-Scholes…
Study markets without safe assets, deriving option pricing equations.
The aim of this paper is to present a simple stochastic model that accounts for the effects of a long-memory in volatility on option pricing. The starting point is the stochastic Black-Scholes equation involving volatility with long-range dependence. We consider the option price as a sum of classical Black-Scholes pric…
Classical (Itô diffusions) stochastic volatility models are not able to capture the steepness of small-maturity implied volatility smiles. Jumps, in particular exponential Lévy and affine models, which exhibit small-maturity exploding smiles, have historically been proposed to remedy this (see \cite{Tank} for an overvi…
Paper evaluates geometric Asian power options using a mixed fractional model.
Analyzes American option pricing with fractional derivatives.
The paper extends Merton model to price equity warrants under subdiffusive fractional Brownian motion of the short rate.
The study examines European option pricing using a generalized tempered stable distribution.
New model uses generalized fractional Brownian motion for stock price prediction.
We study the arbitrage opportunities in the presence of transaction costs in a sequence of binary markets approximating the fractional Black-Scholes model. This approximating sequence was constructed by Sottinen and named fractional binary markets. Since, in the frictionless case, these markets admit arbitrage, we aim …
We found a new series to calculate Black-Scholes efficiently.
Derives Black-Scholes model using central limit theorem.
The paper challenges the notion that asset return doesn't affect Black-Scholes-Merton model.
Derives Black-Scholes model without stochastic calculus or PDEs.
Modeling stochastic arbitrage bubbles in Black-Scholes framework.
The paper proposes a different method of solving a simplified version of the Black-Scholes equation. This paper will discuss the importance of the Black-Scholes equation and its applications in finance.
We analyze a generalized version of the Black-Scholes equation depending on a parameter . It satisfies the martingale condition and coincides with the Black-Scholes equation in the limit case . We show that the generalized equation is exactly solvable in terms of Hermite polynomials a…
Options financial instruments designed to protect investors from the stock market randomness. In 1973, Fisher Black, Myron Scholes and Robert Merton proposed a very popular option pricing method using stochastic differential equations within the Ito interpretation. Herein, we derive the Black-Scholes equation for the o…
New formulas for Black-Scholes option prices and Greeks derived.
Generalizes Black-Scholes model for option pricing under uncertainty.
Neural network learns to solve Black-Scholes for stock options.
Researchers found a new exact solution for pricing Aunt Michaela options using modified Black-Scholes equation.
Paper revisits Black-Scholes model, proving solution existence and measuring market uncertainty.
Using Maple, we compute some analytical solutions of a modified Black-Scholes equation, recently proposed, in the case of the European put option. We show that the modified Black-Scholes equation with the European put option is exactly solvable in terms of associated Laguerre polynomials. We make some numerical experim…
We apply Gauge Theory of Arbitrage (GTA) {hep-th/9710148} to derivative pricing. We show how the standard results of Black-Scholes analysis appear from GTA and derive correction to the Black-Scholes equation due to a virtual arbitrage and speculators reaction on it. The model accounts for both violation of the no-arbit…
We show that the non Hermitian Black-Scholes Hamiltonian and its various generalizations are eta-pseudo Hermitian. The metric operator eta is explicitly constructed for this class of Hamitonians. It is also shown that the effective Black-Scholes Hamiltonian and its partner form a pseudo supersymmetric system.
Motivated by the work of Segal and Segal on the Black-Scholes pricing formula in the quantum context, we study a quantum extension of the Black-Scholes equation within the context of Hudson-Parthasarathy quantum stochastic calculus. Our model includes stock markets described by quantum Brownian motion and Poisson proce…
Random neural nets learn Black-Scholes PDEs without dimensionality issues.
The paper extends Black-Scholes for American call options with variable volatility.
Study reviews Bachelier model for negative oil prices post-COVID.