Design, implementation and validation of advanced lattice techniques for pricing EAKO — European American Knock-Out option

2019 ◽  
Vol 06 (04) ◽  
pp. 1950032 ◽  
Author(s):  
Mattia Fabbri ◽  
Pier Giuseppe Giribone
Keyword(s):  
Numerical Methods ◽  
Adaptive Mesh ◽  
European American ◽  
Knock Out ◽  
Lattice Methods ◽  
Mesh Model ◽  
Real Market

The paper presents a series of advanced lattice methods aimed at evaluating an EAKO European-American Knock-Out contract. The first part of the paper deals with the numerical methods implemented for pricing: Binomial and Trinomial Stochastic trees, Adaptive Mesh Model, Pentanomial and Heptanomial lattice. In the second part, specific tests are designed to validate the code written in Matlab language. The study concludes by applying the most performing model to a real market case.

Numerical Methods for Radiative Feedback from the First Stars: Ionization in Adaptive Mesh Refinement Simulations

2010 ◽  
Author(s):  
Jeffrey S. Oishi ◽  
Chris McKee ◽  
Richard Klein ◽  
Daniel J. Whalen ◽  
Volker Bromm ◽  
...  
Keyword(s):  
Numerical Methods ◽  
Adaptive Mesh Refinement ◽  
Mesh Refinement ◽  
Adaptive Mesh ◽  
First Stars ◽  
Radiative Feedback

Pricing Discrete Barrier Options with an Adaptive Mesh Model

1999 ◽  
Vol 6 (4) ◽  
pp. 33-43 ◽  
Author(s):  
Dong-Hyun Ahn ◽  
Stephen Figlewski ◽  
Bin Gao
Keyword(s):  
Adaptive Mesh ◽  
Barrier Options ◽  
Mesh Model

scholarly journals A new multiscale air quality transport model (Fluidity, 4.1.9) using fully unstructured anisotropic adaptive mesh technology

2015 ◽  
Vol 8 (6) ◽  
pp. 4337-4374
Author(s):  
J. Zheng ◽  
J. Zhu ◽  
Z. Wang ◽  
F. Fang ◽  
C. C. Pain ◽  
...  
Keyword(s):  
Air Quality ◽  
Transport Model ◽  
Control Volume ◽  
Transport Phenomena ◽  
Adaptive Mesh ◽  
Mesh Model ◽  
Adaptive Resolution ◽  
Flow Features ◽  
Mesh Resolution ◽  
Mesh Technique

Abstract. A new anisotropic hr-adaptive mesh technique has been applied to modelling of multiscale transport phenomena, which is based on a discontinuous Galerkin/control volume discretization on unstructured meshes. Over existing air quality models typically based on static-structured grids using a locally nesting technique, the advantage of the anisotropic hr-adaptive model has the ability to adapt the mesh according to the evolving pollutant distribution and flow features. That is, the mesh resolution can be adjusted dynamically to simulate the pollutant transport process accurately and effectively. To illustrate the capability of the anisotropic adaptive unstructured mesh model, three benchmark numerical experiments have been setup for two-dimensional (2-D) transport phenomena. Comparisons have been made between the results obtained using uniform resolution meshes and anisotropic adaptive resolution meshes.

Knock-In and Stocks Market Effect Due to ELS Issuance and Hedging

2015 ◽  
Vol 23 (2) ◽  
pp. 289-321
Author(s):  
Hyuncheul Lim ◽  
Youngsoo Choi
Keyword(s):  
Trading Volume ◽  
Asset Price ◽  
Major Product ◽  
Knock Out ◽  
Shortfall Risk ◽  
Put Option ◽  
Hedging Strategies ◽  
Rate Environment ◽  
Step Down ◽  
Real Market

In this paper we analyze the shortfall risk implied in the auto call step down equity linked securities (ELS) based on two underlying assets, which is a major product of the rapidly growing ELS market as the low interest rate environment continues. And we also present the hedging strategies for managing shortfall risk. In the position of auto call step down ELS issuer, 1) until the underlying asset price reaches at knock-in (KI) level, the delta of the underlying is continually and significantly increased in order to hedge the short position of the Down and Out (DO) option and the long position of the put option inherent in ELS, 2) however, the hedger must reduce this delta as soon as the underperformed underlying price touches KI level, which triggers the vanishing of the DO option. As a way to manage these shortfall risks, this paper proposes two new hedging strategies of minimizing these shortfall risks and depending on the KI probability. Also this paper shows that these hedging strategies provide better performance than traditional BS hedging strategy when these hedging strategies are applied to a sample product with real market data. As the policy proposals, first, in order to prevent the concentration of the KI prices, ELS issue amount based on the same underlying is needed to be determined in consideration of both the average market trading volume and maximum leverage delta. Second, in the realm of pin risk such as Knock-In or Knock-Out, where the leverage increases, it is recommended to mitigate the risk management delta limit based on the BS model which is made under the assumption of continuous hedging infinitesimally.

Sign in / Sign up

Export Citation Format

Share Document