Connecting discrete and continuous path-dependent options
The paper deals with the relation of prices for discrete- and continuous-time version of path-dependent options including lookback, barrier and hindsight options. The authors present the correction terms that improve the approximation of discrete-time prices using continuous-time formulas. For barrier options the correction shifts the barrier to price a discrete option using the continuous formula. For lookbacks the correction shifts the expected maximum or minimum price. In particular, for hindsight options \[ V_{m}(S_{\pm},K)= V(S_{\pm}e^{\pm\beta_{1}\sigma\sqrt{T/m}}, Ke^{\pm\beta_{1}\sigma\sqrt{T/m}})e^{\mp\beta_{1}\sigma\sqrt{T/m}} +o(1/\sqrt{m}), \] where \(V\) denotes the price of a continuous-time version, \(V_{m}\) denotes the price of a discrete-time version of a hindsight option, in \(\pm\) and \(\mp\) the top case applies for calls and the bottom for puts, \(\beta_{1}=-\zeta(1/2)/\sqrt{2\pi}\), \(\zeta\) is the Riemann zeta function, \(S_{+}=\max_{0\leq u\leq t}S_{u}\), \(S_{-}=\min_{0\leq u\leq t} S_{u}\) in continuous-time cases and similar in discrete-time cases, the price \(S_{t}\) of single risky asset evolves according to \(dS_{t}=\nu S_{t}dt+\sigma S_{t}dw_{t}\), where \(w_{t}\) is a standard Wiener process, \(K\) is a strike price, \(m\) is the number of price-fixing dates. The discrete-time discrete-state lattice methods for determining accurate prices of discrete and continuous path-dependent options are developed.
- A continuity correction for discrete barrier options
- On the rate of convergence of prices of barrier options with discrete and continuous time
- Continuity correction for discrete barrier options with two barriers
- A Matched Asymptotic Expansions Approach to Continuity Corrections for Discretely Sampled Options. Part 1: Barrier Options
- Lookback options with discrete and partial monitoring of the underlying price
- Accurate and efficient lattice algorithms for American-style Asian options with range bounds
- Analysis of quadrature methods for pricing discrete barrier options
- Feynman-Kac's representation in time-space domains and sensitivity with respect to the domain
- PDE methods for pricing barrier options
- Using forward Monte-Carlo simulation for the valuation of American barrier options
- Zooming in on a Lévy process at its supremum
- Pricing barrier options in the Heston model using the Heath-Platen estimator
- Contingent claims on assets with conversion costs.
- Improving Brownian approximations for boundary crossing problems
- Numerical schemes for pricing Asian options under state-dependent regime-switching jump-diffusion models
- Efficient Asian option pricing under regime switching jump diffusions and stochastic volatility models
- Explainable neural network for pricing and universal static hedging of contingent claims
- A simple and efficient numerical method for pricing discretely monitored early-exercise options
- Zooming-in on a Lévy process: failure to observe threshold exceedance over a dense grid
- Pricing discretely monitored barrier options: when Malliavin calculus expansions meet Hilbert transforms
- Pricing and exercising American options: an asymptotic expansion approach
- The rate of convergence of option prices on the asset following a geometric Ornstein-Uhlenbeck process
- Discrete approximation of finite-horizon American-style options
- Pricing financial claims contingent upon an underlying asset monitored at discrete times
- Exact approximation rate of killed hypoelliptic diffusions using the discrete Euler scheme
- Hedging in an illiquid binomial market
- Large deviation approaches for the numerical computation of the hitting probability for Gaussian processes
- An efficient convergent lattice algorithm for European Asian options
- Rate of convergence of option prices by using the method of pseudomoments
- Lookback option prices under a spectrally negative tempered-stable model
- Z-Transform and preconditioning techniques for option pricing
- A comprehensive mathematical approach to exotic option pricing
- Rate of convergence of option prices for approximations of the geometric Ornstein-Uhlenbeck process by Bernoulli jumps of prices on assets
- Pricing Asian option by the FFT with higher-order error convergence rate under Lévy processes
- On the monitoring error of the supremum of a normal jump diffusion process
- Connecting discrete and continuous lookback or hindsight options in exponential Lévy models
- Double knock-out Asian barrier options which widen or contract as they approach maturity
- Barrier option pricing: a hybrid method approach
- Functional limit theorems for additive and multiplicative schemes in the Cox-Ingersoll-Ross model
- Correcting for Simulation Bias in Monte Carlo Methods to Value Exotic Options in Models Driven by Lévy Processes
- Pricing Israeli options: a pathwise approach
- PRICING PATH-DEPENDENT OPTIONS ON STATE DEPENDENT VOLATILITY MODELS WITH A BESSEL BRIDGE
- A Matched Asymptotic Expansions Approach to Continuity Corrections for Discretely Sampled Options. Part 1: Barrier Options
- A Matched Asymptotic Expansions Approach to Continuity Corrections for Discretely Sampled Options. Part 2: Bermudan Options
- PIDE and Solution Related to Pricing of Lévy Driven Arithmetic Type Floating Asian Options
- Diffusion approximation of recurrent schemes for financial markets, with application to the Ornstein-Uhlenbeck process
- LOCAL SCALE INVARIANCE AND CONTINGENT CLAIM PRICING II: PATH-DEPENDENT CONTINGENT CLAIMS
- THE WIENER-HOPF TECHNIQUE AND DISCRETELY MONITORED PATH-DEPENDENT OPTION PRICING
- Perpetual Bermudan Continuity Corrections and a Multi-Dimensional Wiener–Hopf Type Result
- Using the continuous price as control variate for discretely monitored options
- Highs and lows: Some properties of the extremes of a diffusion and applications in finance
- Pricing Discrete European Barrier Options Using Lattice Random Walks
- Exercise Regions And Efficient Valuation Of American Lookback Options
- Lookback options with discrete and partial monitoring of the underlying price
- Valuation of discrete dynamic fund protection under Lévy processes
- Chapman-Kolmogorov lattice method for derivatives pricing
- Geometrically convergent simulation of the extrema of Lévy processes
- Closed-form expansions of discretely monitored Asian options in diffusion models
- Lookback option pricing using the Fourier transform B-spline method
- Asymptotic equivalence between boundary perturbations and discrete exit times: application to simulation schemes
- Robust barrier option pricing by frame projection under exponential Lévy dynamics
- LOCALIZED MONTE CARLO ALGORITHM TO COMPUTE PRICES OF PATH DEPENDENT OPTIONS ON TREES
- THE PRICING OF EXOTIC OPTIONS BY MONTE–CARLO SIMULATIONS IN A LÉVY MARKET WITH STOCHASTIC VOLATILITY
- A moment expansion approach to option pricing
- Pricing Discrete Dynamic Fund Protections
- Dynamic Fund Protection
- A general approach for lookback option pricing under Markov models
- Continuity correction: on the pricing of discrete double barrier options
- Clarifying the asymptotic behavior of the overshoot in random walks
- Exotic options under Lévy models: an overview
- An exact subexponential-time lattice algorithm for Asian options
- Lookback options and dynamic fund protection under multiscale stochastic volatility
- Lookback option pricing for regime-switching jump diffusion models
- Discretely monitored first passage problems and barrier options: an eigenfunction expansion approach
- Prices and sensitivities of Asian options: A survey
- Computing exponential moments of the discrete maximum of a Lévy process and lookback options
- Option pricing, maturity randomization and distributed computing
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