Barrier options
Asset managers prep autocall ETFs with assets tipped to hit $30bn
Actively managed strategies wait in the wings after systematic approach nets Calamos $500m
Return to the barrier: option pricing and calibration in foreign exchange markets
The authors investigate return barrier options and how failing to capture the market’s implied volatility surface can lead to mispricing of these options.
A hard exit threshold strategy for market-makers
A closed-form solution to derive optimal stop-loss and profit-taking levels is presented
Standardised FRTB leaves banks befuddled on residual risk
Benchmarking exercises find “weak consensus” among banks over notional values for exotics
Digging deeper into deep hedging
Dynamic techniques and GenAI simulated data can push the limits of deep hedging even further, as derivatives guru John Hull and colleagues explain
Hedge funds ease off profitable China FX options trade
Some still hold positions but an appreciating renminbi may make them less profitable for now
Hedge funds’ use of barrier options comes under spotlight
Former traders say Glen Point CEO’s arrest highlights compliance gulf between funds and dealers
Podcast: Zetocha on mini-futures (not those) and illiquid options
Julius Baer equity quant revels in solving problems for the trading desk
UK budget gives sterling options traders a wild ride
Reaction to tax cuts sparks most active week for GBP/USD options traders since Brexit negotiations
Pricing barrier options with deep backward stochastic differential equation methods
This paper presents a novel and direct approach to solving boundary- and final-value problems, corresponding to barrier options, using forward pathwise deep learning and forward–backward stochastic differential equations.
Automatic differentiation for diffusion operator integral variance reduction
This paper demonstrates applications of automatic differentiation with nested dual numbers in the diffusion operator integral variance-reduction framework originally proposed by Heath and Platen.
Rough volatility moves to exotic frontiers
New simulation scheme clears the way for broader application of the rough Heston model
Range accruals under spotlight as Taiwan prepares for FRTB
Taiwanese banks review viability of products offering options on long-dated rates
Calibration of local-stochastic and path-dependent volatility models to vanilla and no-touch options
In this paper, the authors consider a large class of continuous semi-martingale models and propose a generic framework for their simultaneous calibration to vanilla and no-touch options.
The volatility paradigm that’s stirring up options pricing
‘Rough volatility’ models promise better pricing and hedging of options. But will they catch on?
Solving final value problems with deep learning
Pricing vanilla and exotic options with a deep learning approach for PDEs
Semi-closed-form prices of barrier options in the Hull-White model
New pricer for options with time-dependent barrier shown to be computationally efficient and stable
Pricing multiple barrier derivatives under stochastic volatility
This work generalizes existing one- and two-dimensional pricing formulas with an equal number of barriers to a setting of n dimensions and up to two barriers in the presence of stochastic volatility.
Breaking barriers in options pricing
A new technique for pricing exotic options unifies two classic models
Finite difference schemes with exact recovery of vanilla option prices
A model unifies the classic local vol and binomial trees to accurately price options
Monte Carlo pathwise sensitivities for barrier options
In this work, we present a new Monte Carlo algorithm that is able to calculate the pathwise sensitivities for discontinuous payoff functions.