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Alet Roux

Publications and source records attributed to Alet Roux.

14 recordsLinked to original sources

Stationary solution for a fractional stochastic delay differential equations with multiple delays

This paper studies a linear stochastic delay differential equation driven by fractional Brownian motion and involving a finite number of discrete delays. The model combines two sources of memory: delayed feedback in the drift and temporal dependence induced by the Hurst parameter of the fractional Brownian motion. We first introduce the fundamental solution associated with the corresponding deterministic delay equation and use it to obtain an explicit representation of the solution. The stochastic convolution with respect to fractional Brownian motion is defined pathwise as a Riemann--Stieltjes integral, using the finite-variation properties of the fundamental solution. This representation allows us to compute the mean and auto-covariance function of the process. Under a delay-independent stability condition on the drift coefficients, we prove that the fundamental solution decays exponentially and derive the long-time behaviour of the stochastic delay equation. In particular, the solution converges in finite-dimensional distributions to a stationary Gaussian process, whose limiting mean and covariance are given explicitly. When the Hurst parameter satisfies \(H>1/2\), we show that the limiting covariance preserves the long-memory behaviour of the driving fractional Brownian motion and decays asymptotically as \(h^{2H-2}\). Finally, by extending the noise to a double-sided fractional Brownian motion, we construct a stationary solution of the equation and prove its uniqueness. The results provide a tractable framework for modelling stationary systems with both delay effects and fractional memory, with potential applications to stochastic volatility, energy modelling, and other time series exhibiting persistence.

math.PR

Accelerated Quantum Amplitude Estimation without QFT

We put forward a Quantum Amplitude Estimation algorithm delivering superior performance (lower quantum computational complexity and faster classical computation parts) compared to the approaches available to-date. The algorithm does not relay on the Quantum Fourier Transform and its quantum computational complexity is of order $O(\frac{1}{\varepsilon})$ in terms of the target accuracy $\varepsilon>0$. The $O(\frac{1}{\varepsilon})$ bound on quantum computational complexity is also superior compared to those in the earlier approaches due to smaller constants. Moreover, a much tighter bound is obtained by means of computer-assisted estimates for the expected value of quantum computational complexity. The correctness of the algorithm and the $O(\frac{1}{\varepsilon})$ bound on quantum computational complexity are supported by precise proofs.

quant-ph

Linear short rate model with several delays

This paper introduces a short rate model in continuous time that adds one or more memory (delay) components to the Merton model (Merton 1970, 1973) or the Vasi\v{c}ek model (Vasi\v{c}ek 1977) for the short rate. The distribution of the short rate in this model is normal, with the mean depending on past values of the short rate, and a limiting distribution exists for certain values of the parameters. The zero coupon bond price is an affine function of the short rate, whose coefficients satisfy a system of delay differential equations. This system can be solved analytically, obtaining a closed formula. An analytical expression for the instantaneous forward rate is given: it satisfies the risk neutral dynamics of the Heath-Jarrow-Morton model. Formulae for both forward looking and backward looking caplets on overnight risk free rates are presented. Finally, the proposed model is calibrated against forward looking caplets on SONIA rates and the United States yield curve.

q-fin.MF

Higher order approximation of option prices in Barndorff-Nielsen and Shephard models

We present an approximation method based on the mixing formula (Hull & White 1987, Romano & Touzi 1997) for pricing European options in Barndorff-Nielsen and Shephard models. This approximation is based on a Taylor expansion of the option price. It is implemented using a recursive algorithm that allows us to obtain closed form approximations of the option price of any order (subject to technical conditions on the background driving L\'evy process). This method can be used for any type of Barndorff-Nielsen and Shephard stochastic volatility model. Explicit results are presented in the case where the stationary distribution of the background driving L\'evy process is inverse Gaussian or gamma. In both of these cases, the approximation compares favorably to option prices produced by the characteristic function. In particular, we also perform an error analysis of the approximation, which is partially based on the results of Das & Langren\'e (2022). We obtain asymptotic results for the error of the $N^{\text{th}}$ order approximation and error bounds when the variance process satisfies an inverse Gaussian Ornstein-Uhlenbeck process or a gamma Ornstein-Uhlenbeck process.

q-fin.CP

Bitcoin option pricing: A market attention approach

A model is proposed for Bitcoin prices that takes into account market attention. Market attention, modeled by a mean-reverting Cox-Ingersoll-Ross processes, affects the volatility of Bitcoin returns, with some delay. The model is affine and tractable, with closed formulae for the conditional characteristic functions with respect to both the conventional and a delayed filtration. This leads to semi-closed formulae for European call and put prices. A maximum likelihood estimation procedure is provided, as well as a method for changing to a risk-neutral measure. The model compares very well against classical and attention-based models when tested on real data.

q-fin.PR

Optimal investment and contingent claim valuation with exponential disutility under proportional transaction costs

We consider indifference pricing of contingent claims consisting of payment flows in a discrete time model with proportional transaction costs and under exponential disutility. This setting covers utility maximisation as a special case. A dual representation is obtained for the associated disutility minimisation problem, together with a dynamic procedure for solving it. This leads to efficient and convergent numerical procedures for indifference pricing, optimal trading strategies and shadow prices that apply to a wide range of payoffs, a large range of time steps and all magnitudes of transaction costs.

q-fin.MF

Game options with gradual exercise and cancellation under proportional transaction costs

Game (Israeli) options in a multi-asset market model with proportional transaction costs are studied in the case when the buyer is allowed to exercise the option and the seller has the right to cancel the option gradually at a mixed (or randomised) stopping time, rather than instantly at an ordinary stopping time. Allowing gradual exercise and cancellation leads to increased flexibility in hedging, and hence tighter bounds on the option price as compared to the case of instantaneous exercise and cancellation. Algorithmic constructions for the bid and ask prices, and the associated superhedging strategies and optimal mixed stopping times for both exercise and cancellation are developed and illustrated. Probabilistic dual representations for bid and ask prices are also established.

q-fin.PR

Pricing and hedging game options in currency models with proportional transaction costs

The pricing, hedging, optimal exercise and optimal cancellation of game or Israeli options are considered in a multi-currency model with proportional transaction costs. Efficient constructions for optimal hedging, cancellation and exercise strategies are presented, together with numerical examples, as well as probabilistic dual representations for the bid and ask price of a game option.

q-fin.MF

Linear vector optimization and European option pricing under proportional transaction costs

A method for pricing and superhedging European options under proportional transaction costs based on linear vector optimisation and geometric duality developed by Lohne & Rudloff (2014) is compared to a special case of the algorithms for American type derivatives due to Roux & Zastawniak (2014). An equivalence between these two approaches is established by means of a general result linking the support function of the upper image of a linear vector optimisation problem with the lower image of the dual linear optimisation problem.

q-fin.PR

American and Bermudan options in currency markets under proportional transaction costs

The pricing and hedging of a general class of options (including American, Bermudan and European options) on multiple assets are studied in the context of currency markets where trading is subject to proportional transaction costs, and where the existence of a risk-free numéraire is not assumed. Constructions leading to algorithms for computing the prices, optimal hedging strategies and stopping times are presented for both long and short option positions in this setting, together with probabilistic (martingale) representations for the option prices.

q-fin.PR

American options with gradual exercise under proportional transaction costs

American options in a multi-asset market model with proportional transaction costs are studied in the case when the holder of an option is able to exercise it gradually at a so-called mixed (randomised) stopping time. The introduction of gradual exercise leads to tighter bounds on the option price when compared to the case studied in the existing literature, where the standard assumption is that the option can only be exercised instantly at an ordinary stopping time. Algorithmic constructions for the bid and ask prices and the associated superhedging strategies and optimal mixed stoping times for an American option with gradual exercise are developed and implemented, and dual representations are established.

q-fin.PR

Parallel Binomial American Option Pricing with (and without) Transaction Costs

We present a parallel algorithm that computes the ask and bid prices of an American option when proportional transaction costs apply to the trading of the underlying asset. The algorithm computes the prices on recombining binomial trees, and is designed for modern multi-core processors. Although parallel option pricing has been well studied, none of the existing approaches takes transaction costs into consideration. The algorithm that we propose partitions a binomial tree into blocks. In any round of computation a block is further partitioned into regions which are assigned to distinct processors. To minimise load imbalance the assignment of nodes to processors is dynamically adjusted before each new round starts. Synchronisation is required both within a round and between two successive rounds. The parallel speedup of the algorithm is proportional to the number of processors used. The parallel algorithm was implemented in C/C++ via POSIX Threads, and was tested on a machine with 8 processors. In the pricing of an American put option, the parallel speedup against an efficient sequential implementation was 5.26 using 8 processors and 1500 time steps, achieving a parallel efficiency of 65.75%.

cs.DC

The fundamental theorem of asset pricing under proportional transaction costs

We extend the fundamental theorem of asset pricing to a model where the risky stock is subject to proportional transaction costs in the form of bid-ask spreads and the bank account has different interest rates for borrowing and lending. We show that such a model is free of arbitrage if and only if one can embed in it a friction-free model that is itself free of arbitrage, in the sense that there exists an artificial friction-free price for the stock between its bid and ask prices and an artificial interest rate between the borrowing and lending interest rates such that, if one discounts this stock price by this interest rate, then the resulting process is a martingale under some non-degenerate probability measure. Restricting ourselves to the simple case of a finite number of time steps and a finite number of possible outcomes for the stock price, the proof follows by combining classical arguments based on finite-dimensional separation theorems with duality results from linear optimisation.

q-fin.PR

American Options under Proportional Transaction Costs: Pricing, Hedging and Stopping Algorithms for Long and Short Positions

American options are studied in a general discrete market in the presence of proportional transaction costs, modelled as bid-ask spreads. Pricing algorithms and constructions of hedging strategies, stopping times and martingale representations are presented for short (seller's) and long (buyer's) positions in an American option with an arbitrary payoff. This general approach extends the special cases considered in the literature concerned primarily with computing the prices of American puts under transaction costs by relaxing any restrictions on the form of the payoff, the magnitude of the transaction costs or the discrete market model itself. The largely unexplored case of pricing, hedging and stopping for the American option buyer under transaction costs is also covered. The pricing algorithms are computationally efficient, growing only polynomially with the number of time steps in a recombinant tree model. The stopping times realising the ask (seller's) and bid (buyer's) option prices can differ from one another. The former is generally a so-called mixed (randomised) stopping time, whereas the latter is always a pure (ordinary) stopping time.

q-fin.PR