We develop two new pricing formulae for European options. The purpose of these formulae is to better understand the impact of each term of the model, as well as improve the speed of the calculations. We consider the S...We develop two new pricing formulae for European options. The purpose of these formulae is to better understand the impact of each term of the model, as well as improve the speed of the calculations. We consider the SABR model (with β=1) of stochastic volatility, which we analyze by tools from Malliavin Calculus. We follow the approach of Alòs et al. (2006) who showed that under stochastic volatility framework, the option prices can be written as the sum of the classic Hull-White (1987) term and a correction due to correlation. We derive the Hull-White term, by using the conditional density of the average volatility, and write it as a two-dimensional integral. For the correction part, we use two different approaches. Both approaches rely on the pairing of the exponential formula developed by Jin, Peng, and Schellhorn (2016) with analytical calculations. The first approach, which we call “Dyson series on the return’s idiosyncratic noise” yields a complete series expansion but necessitates the calculation of a 7-dimensional integral. Two of these dimensions come from the use of Yor’s (1992) formula for the joint density of a Brownian motion and the time-integral of geometric Brownian motion. The second approach, which we call “Dyson series on the common noise” necessitates the calculation of only a one-dimensional integral, but the formula is more complex. This research consisted of both analytical derivations and numerical calculations. The latter show that our formulae are in general more exact, yet more time-consuming to calculate, than the first order expansion of Hagan et al. (2002).展开更多
The SABR stochastic volatility model with β-volatility β ? (0,1) and an absorbing barrier in zero imposed to the forward prices/rates stochastic process is studied. The presence of (possibly) nonzero correlation bet...The SABR stochastic volatility model with β-volatility β ? (0,1) and an absorbing barrier in zero imposed to the forward prices/rates stochastic process is studied. The presence of (possibly) nonzero correlation between the stochastic differentials that appear on the right hand side of the model equations is considered. A series expansion of the transition probability density function of the model in powers of the correlation coefficient of these stochastic differentials is presented. Explicit formulae for the first three terms of this expansion are derived. These formulae are integrals of known integrands. The zero-th order term of the expansion is a new integral formula containing only elementary functions of the transition probability density function of the SABR model when the correlation coefficient is zero. The expansion is deduced from the final value problem for the backward Kolmogorov equation satisfied by the transition probability density function. Each term of the expansion is defined as the solution of a final value problem for a partial differential equation. The integral formulae that give the solutions of these final value problems are based on the Hankel and on the Kontorovich-Lebedev transforms. From the series expansion of the probability density function we deduce the corresponding expansions of the European call and put option prices. Moreover we deduce closed form formulae for the moments of the forward prices/rates variable. The moment formulae obtained do not involve integrals or series expansions and are expressed using only elementary functions. The option pricing formulae are used to study synthetic and real data. In particular we study a time series (of real data) of futures prices of the EUR/USD currency's exchange rate and of the corresponding option prices. The website: http://www.econ.univpm.it/recchioni/finance/w18 contains material including animations, an interactive application and an app that helps the understanding of the paper. A more general reference to the work of the authors and of their coauthors in mathematical finance is the website:http://www.econ.univpm.it/recchioni/finance.展开更多
We study two calibration problems for the lognormal SABR model using the moment method and some new formulae for the moments of the logarithm of the forward prices/rates variable. The lognormal SABR model is a special...We study two calibration problems for the lognormal SABR model using the moment method and some new formulae for the moments of the logarithm of the forward prices/rates variable. The lognormal SABR model is a special case of the SABR model [1]. The acronym “SABR” means “Stochastic-αβρ” and comes from the original names of the model parameters (i.e., α,β,ρ) [1]. The SABR model is a system of two stochastic differential equations widely used in mathematical finance whose independent variable is time and whose dependent variables are the forward prices/rates and the associated stochastic volatility. The lognormal SABR model corresponds to the choice β = 1 and depends on three quantities: the parameters??α,ρ and the initial stochastic volatility. In fact the initial stochastic volatility cannot be observed and can be regarded as a parameter. A calibration problem is an inverse problem that consists in determineing the values of these three parameters starting from a set of data. We consider two different sets of data, that is: i) the set of the forward prices/rates observed at a given time on multiple independent trajectories of the lognormal SABR model, ii) the set of the forward prices/rates observed on a discrete set of known time values along a single trajectory of the lognormal SABR model. The calibration problems corresponding to these two sets of data are formulated as constrained nonlinear least-squares problems and are solved numerically. The formulation of these nonlinear least-squares problems is based on some new formulae for the moments of the logarithm of the forward prices/rates. Note that in the financial markets the first set of data considered is hardly available while the second set of data is of common use and corresponds simply to the time series of the observed forward prices/rates. As a consequence the first calibration problem although realistic in several contexts of science and engineering is of limited interest in finance while the second calibration problem is of practical use in finance (and elsewhere). The formulation of these calibration problems and the methods used to solve them are tested on synthetic and on real data. The real data studied are the data belonging to a time series of exchange rates between currencies (euro/U.S. dollar exchange rates).展开更多
Late-Onset Epilepsy (LOE), with onset in adult life, is often attributed to cerebrovascular disease and intracranial tumor. Herein we present a LOE patient with history of Linear Scleroderma en Coup de Sabre (LScs) an...Late-Onset Epilepsy (LOE), with onset in adult life, is often attributed to cerebrovascular disease and intracranial tumor. Herein we present a LOE patient with history of Linear Scleroderma en Coup de Sabre (LScs) and abnormal cranial MRI signs. Curiously, his band-like skin lesion, presenting on the forehead, was in line with the surface projection of the intracranial focus shown in MRI. This gave a clue of the link between the skin lesion and the intracranial focus and the epilepsy. To sum up, it exposed a rare cause of LOE. Moreover, it underlined the significance of recognizing the cause to be associated with a substantially increased risk of developing epilepsy.展开更多
文摘We develop two new pricing formulae for European options. The purpose of these formulae is to better understand the impact of each term of the model, as well as improve the speed of the calculations. We consider the SABR model (with β=1) of stochastic volatility, which we analyze by tools from Malliavin Calculus. We follow the approach of Alòs et al. (2006) who showed that under stochastic volatility framework, the option prices can be written as the sum of the classic Hull-White (1987) term and a correction due to correlation. We derive the Hull-White term, by using the conditional density of the average volatility, and write it as a two-dimensional integral. For the correction part, we use two different approaches. Both approaches rely on the pairing of the exponential formula developed by Jin, Peng, and Schellhorn (2016) with analytical calculations. The first approach, which we call “Dyson series on the return’s idiosyncratic noise” yields a complete series expansion but necessitates the calculation of a 7-dimensional integral. Two of these dimensions come from the use of Yor’s (1992) formula for the joint density of a Brownian motion and the time-integral of geometric Brownian motion. The second approach, which we call “Dyson series on the common noise” necessitates the calculation of only a one-dimensional integral, but the formula is more complex. This research consisted of both analytical derivations and numerical calculations. The latter show that our formulae are in general more exact, yet more time-consuming to calculate, than the first order expansion of Hagan et al. (2002).
文摘The SABR stochastic volatility model with β-volatility β ? (0,1) and an absorbing barrier in zero imposed to the forward prices/rates stochastic process is studied. The presence of (possibly) nonzero correlation between the stochastic differentials that appear on the right hand side of the model equations is considered. A series expansion of the transition probability density function of the model in powers of the correlation coefficient of these stochastic differentials is presented. Explicit formulae for the first three terms of this expansion are derived. These formulae are integrals of known integrands. The zero-th order term of the expansion is a new integral formula containing only elementary functions of the transition probability density function of the SABR model when the correlation coefficient is zero. The expansion is deduced from the final value problem for the backward Kolmogorov equation satisfied by the transition probability density function. Each term of the expansion is defined as the solution of a final value problem for a partial differential equation. The integral formulae that give the solutions of these final value problems are based on the Hankel and on the Kontorovich-Lebedev transforms. From the series expansion of the probability density function we deduce the corresponding expansions of the European call and put option prices. Moreover we deduce closed form formulae for the moments of the forward prices/rates variable. The moment formulae obtained do not involve integrals or series expansions and are expressed using only elementary functions. The option pricing formulae are used to study synthetic and real data. In particular we study a time series (of real data) of futures prices of the EUR/USD currency's exchange rate and of the corresponding option prices. The website: http://www.econ.univpm.it/recchioni/finance/w18 contains material including animations, an interactive application and an app that helps the understanding of the paper. A more general reference to the work of the authors and of their coauthors in mathematical finance is the website:http://www.econ.univpm.it/recchioni/finance.
文摘We study two calibration problems for the lognormal SABR model using the moment method and some new formulae for the moments of the logarithm of the forward prices/rates variable. The lognormal SABR model is a special case of the SABR model [1]. The acronym “SABR” means “Stochastic-αβρ” and comes from the original names of the model parameters (i.e., α,β,ρ) [1]. The SABR model is a system of two stochastic differential equations widely used in mathematical finance whose independent variable is time and whose dependent variables are the forward prices/rates and the associated stochastic volatility. The lognormal SABR model corresponds to the choice β = 1 and depends on three quantities: the parameters??α,ρ and the initial stochastic volatility. In fact the initial stochastic volatility cannot be observed and can be regarded as a parameter. A calibration problem is an inverse problem that consists in determineing the values of these three parameters starting from a set of data. We consider two different sets of data, that is: i) the set of the forward prices/rates observed at a given time on multiple independent trajectories of the lognormal SABR model, ii) the set of the forward prices/rates observed on a discrete set of known time values along a single trajectory of the lognormal SABR model. The calibration problems corresponding to these two sets of data are formulated as constrained nonlinear least-squares problems and are solved numerically. The formulation of these nonlinear least-squares problems is based on some new formulae for the moments of the logarithm of the forward prices/rates. Note that in the financial markets the first set of data considered is hardly available while the second set of data is of common use and corresponds simply to the time series of the observed forward prices/rates. As a consequence the first calibration problem although realistic in several contexts of science and engineering is of limited interest in finance while the second calibration problem is of practical use in finance (and elsewhere). The formulation of these calibration problems and the methods used to solve them are tested on synthetic and on real data. The real data studied are the data belonging to a time series of exchange rates between currencies (euro/U.S. dollar exchange rates).
文摘Late-Onset Epilepsy (LOE), with onset in adult life, is often attributed to cerebrovascular disease and intracranial tumor. Herein we present a LOE patient with history of Linear Scleroderma en Coup de Sabre (LScs) and abnormal cranial MRI signs. Curiously, his band-like skin lesion, presenting on the forehead, was in line with the surface projection of the intracranial focus shown in MRI. This gave a clue of the link between the skin lesion and the intracranial focus and the epilepsy. To sum up, it exposed a rare cause of LOE. Moreover, it underlined the significance of recognizing the cause to be associated with a substantially increased risk of developing epilepsy.
