We present a new and general technique for obtaining closed-form expansions for prices of options in the Heston model, in terms of Black-Scholes prices and Black-Scholes Greeks up to arbitrary order. We then apply the technique to solve, in detail, the cases for the second-order and third-order...

Implicit finite difference methods are conventionally preferred over their explicit counterparts for the numerical valuation of options. In large part the reason for this is a severe stability constraint known as the Courant-Friedrichs-Lewy (CFL) condition which limits the latter class's...

The interrelation between the drift coefficient of price processes on arbitrage-free financial markets and the corresponding transition probabilities induced by a martingale measure is analysed in a discrete setup. As a result, we obtain a flexible setting that encompasses most arbitrage-free...

In this paper, we suggest several improvements to the numerical implementation of the quantization method for stochastic control problems in order to obtain fast and accurate premium estimations. This technique is applied to derivative pricing in energy markets. Several ways of modeling energy...

Most electricity markets exhibit high volatilities and occasional distinctive price spikes, which result in demand for derivative products which protect the holder against high prices. In this paper we examine a simple spot price model that is the exponential of the sum of an Ornstein-Uhlenbeck...

We consider the option pricing model proposed by Mancino and Ogawa, where the implementation of dynamic hedging strategies has a feedback impact on the price process of the underlying asset. We present numerical results showing that the smile and skewness patterns of implied volatility can...