Pricing complexity options

DOI10.3233/AF-150050MaRDI QIDQ4586430zbMATH OpenOpenAlexFDO

Authors Malihe Alikhani, Bjørn Kjos-Hanssen, Amirarsalan Pakravan, Babak Saadat

Publication date 13 September 2018

Published in Algorithmic Finance (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1505.03587

zbMATH Keywords

automatic complexityKolmogorov complexityoption pricingoptions

Mathematics Subject Classification ID

Stopping times; optimal stopping problems; gambling theory (60G40) Analysis of algorithms and problem complexity (68Q25) Derivative securities (option pricing, hedging, etc.) (91G20) Numerical methods (including Monte Carlo methods) (91G60)

Abstract: We consider options that pay the complexity deficiency of a sequence of up and down ticks of a stock upon exercise. We study the price of European and American versions of this option numerically for automatic complexity, and theoretically for Kolmogorov complexity. We also consider run complexity, which is a restricted form of automatic complexity.

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Cited in

(1)

• Complex compound option models -- can practitioners truly operationalize them?

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