We present a pricing method based on Shannon wavelet expansions for early-exercise and discretely-monitored barrier options under exponential Lévy asset dynamics. Shannon wavelets are smooth, and thus approximate the densities that occur in finance well, resulting in exponential convergence....

Credit Valuation Adjustment (CVA) has become an important field as its calculation is required in Basel III, issued in 2010, in the wake of the credit crisis. Exposure, which is defined as the potential future loss on a financial contract due to a default event, is one of the key elements for...

The SWIFT method for pricing European-style options on one underlying asset was recently published and presented as an accurate, robust and highly efficient technique. The purpose of this paper is to extend the method to higher dimensions by pricing exotic option contracts, called rainbow...

We present in a Monte Carlo simulation framework a novel approach for the evaluation of hybrid local volatility (Dupire 1994, Derman and Kani 1998) models. In particular, we consider the stochastic local volatility model - see e.g. Lipton et al. (2014), Piterbarg (2007), Tataru and Fisher...

In the search for robust, accurate and highly efficient financial option valuation techniques, we here present the SWIFT method (Shannon Wavelets Inverse Fourier Technique), based on Shannon wavelets. SWIFT comes with control over approximation errors made by means of sharp quantitative error...

In this paper, a recently developed regression-based option pricing method, the Stochastic Grid Bundling Method (SGBM), is implemented for pricing multidimensional Bermudan options. We compare SGBM to a traditional regression-based pricing approach and present detailed insight in the application...

We study the impact of wrong-way-risk (WWR) on credit valuation adjustment (CVA) for European and Bermudan options, based on an intensity model. WWR is modeled by a dependency between the underlying asset and the intensity of the counterparty's default. We consider three different models. We...

This paper considers the problem of pricing options with early-exercise features whose pay-off depends on several sources of uncertainty. We propose a stochastic grid method for estimating the optimal exercise policy and using this policy to obtain a low-biased estimator for high-dimensional...

We present a novel method for pricing European options based on the wavelet approximation (WA) method and the characteristic function. We focus on the discounted expected payoff pricing formula, and compute it by means of wavelets. We approximate the density function associated to the underlying...

We model the joint dynamics of stock and interest rate by a hybrid SABR-Hull-White model, in which the asset price dynamics are modeled by the SABR model and the interest rate dynamics by the Hull-White short-rate model. We propose a projection formula, mapping the SABR-HW model parameters onto...