High-resolution path-integral development of financial options
Lester Ingber
Abstract
The Black-Scholes theory of option pricing has been considered for many years as an important but very approximate zeroth-order description of actual market behavior. We generalize the functional form of the diffusion of these systems and also consider multi-factor models including stochastic volatility. Daily Eurodollar futures prices and implied volatilities are fit to determine exponents of functional behavior of diffusions using methods of global optimization, Adaptive Simulated Annealing (ASA), to generate tight fits across moving time windows of Eurodollar contracts. These short-time fitted distributions are then developed into long-time distributions using a robust non-Monte Carlo path-integral algorithm, PATHINT, to generate prices and derivatives commonly used by option traders.
Create a lesson
Related papers
Physical-state supervision for design-only Gaussian process surrogates of implosion simulations
Chang Liu, Hao Shen, Chuanying Li
Energy-dependent trapping of backscattered helium during magnetron sputtering growth: A molecular dynamics study
Pascal Brault, Anne-Lise Thomann, Alejandro Borroto
Alter-excitons in Altermagnets: Symmetry, Splitting and Dispersion
Yuanfan Xiong, Liangyu Wang, Xuan Wu et al.
All-electron RT-TDDFT with Exact Exchange based on Numeric Atom-centered Orbitals for Condensed Matter
Jianhang Xu, Christopher Shepard, Yosuke Kanai
Polyconvex neural-network surrogates with learned paired directional features for anisotropic hyperelastic homogenization
S. Ares de Parga, A. Cornejo, J. A. Hernández et al.
Parallel Design of a GPU-Resident Semi-Lagrangian Drift-Kinetic Solver on Unstructured Extruded Tokamak Meshes
Mark F. Adams