Spread options are multi-asset options whose payoffs depend on the difference of two underlying financial variables. In most cases, analytically closed form solutions for pricing such payoffs are not available, and the application of numerical pricing methods turns out to be non-trivial. We...

As is known, an option price is a solution to a certain partial differential equation (PDE) with terminal conditions (payoff functions). There is a close association between the solution of PDE and the solution of a backward stochastic differential equation (BSDE). We can either solve the PDE to...

The majority of quasi-analytic pricing methods for American options are efficient near-maturity but are prone to larger errors when time-to-maturity increases. A new methodology, called the "extension"-method, is introduced to increase the accuracy of almost any existing quasi-analytic approach...

We introduce a fast and widely applicable numerical pricing method that uses recursive projections. The method is based on a simple grid sampling of value functions and state-price densities. Numerical illustrations with different American and Bermudan payoffs with dividend paying stocks in the...

We present a quasi-analytical method for pricing multi-dimensional American options based on interpolating two arbitrage bounds, along the lines of Johnson (1983). Our method allows for the close examination of the interpolation parameter on a rigorous theoretical footing instead of empirical...

In this paper, European put option pricing with stochastic volatility forecasted by well known GARCH model is discussed in context of Indian financial market. The data of Reliance Ltd. stock price from 3/01/2000 to 30/03/2009 is used and resulting partial differential equation is solved by...

We present a quasi-analytical method for pricing multi-dimensional American options based on interpolating two arbitrage bounds, along the lines of Johnson in J Financ Quant Anal 18(1):141–148 (1983). Our method allows for the close examination of the interpolation parameter on a rigorous...

Pricing different types of derivative contracts to minimize risk is a significant step for business sustainability. Whaley (2006) refers that for the European Puts and Calls, known as vanilla options, there is a closed form solution that delivers the 'fair' price of the option with respect to...