191,419 research outputs found

    Applications of New Diffusion Models to Barrier Option Pricing and First Hitting Time in Finance

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    The main focus of this thesis is in the application of a new family of analytical solvable diffusion models to arbitrage-free pricing exotic financial derivatives, such as barrier options. The family of diffusions is the so-called “Drifted Bessel family” having nonlinear (smile-like) local volatility with multiple adjustable parameters. In particular, the drifted Bessel-K diffusion is used to model asset (stock) price processes under a risk-neutral measure whereby discounted asset price are martingales. Closed-form spectral expansions for barrier option values are derived within the Bessel-K family of models. This follow from the closed-form spectral expansions for the transition probability densities which are obtained for the Bessel family of processes with imposed killing boundaries. We also show that the commonly adopted CEV model is recovered as a special parametric limit of our Bessel family of models for the case of zero drift. The rapid convergence of the spectral expansions leads to very efficient numerical implementations of barrier option pricing and sensitivity analysis. We hence carry out various numerical computations in order to study the relative effects of the parameters (state dependencies) of the Bessel family of models with respect to barrier option pricing and hedging. We compare our results with the standard Black-Scholes (GBM) and CEV models, demonstrating that model specification leads to important differences when pricing non-vanilla options, such as barrier options

    Multilevel Monte Carlo methods for applications in finance

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    Since Giles introduced the multilevel Monte Carlo path simulation method [18], there has been rapid development of the technique for a variety of applications in computational finance. This paper surveys the progress so far, highlights the key features in achieving a high rate of multilevel variance convergence, and suggests directions for future research.Comment: arXiv admin note: text overlap with arXiv:1202.6283; and with arXiv:1106.4730 by other author

    Vanna-Volga methods applied to FX derivatives : from theory to market practice

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    We study Vanna-Volga methods which are used to price first generation exotic options in the Foreign Exchange market. They are based on a rescaling of the correction to the Black-Scholes price through the so-called `probability of survival' and the `expected first exit time'. Since the methods rely heavily on the appropriate treatment of market data we also provide a summary of the relevant conventions. We offer a justification of the core technique for the case of vanilla options and show how to adapt it to the pricing of exotic options. Our results are compared to a large collection of indicative market prices and to more sophisticated models. Finally we propose a simple calibration method based on one-touch prices that allows the Vanna-Volga results to be in line with our pool of market data

    Hepatitis C virus resistance to the new direct-acting antivirals

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    Introduction: The treatment of hepatitis C virus (HCV) infection has dramatically improved in recent years with the widespread use of interferon-free combination regimens. Despite the high sustained virological response (SVR) rates (over 90%) obtained with direct-acting antivirals (DAAs), drug resistance has emerged as a potential challenge. The high replication rate of HCV and the low fidelity of its RNA polymerase result in a high degree of genetic variability in the HCV population, which ultimately explains the rapid selection of drug resistance associated variants (RAVs). Areas covered: Results from clinical trials and real-world experience have both provided important information on the rate and clinical significance of RAVs. They can be present in treatment-naive patients as natural polymorphisms although more frequently they are selected upon treatment failure. In patients engaged in high-risk behaviors, RAVs can be transmitted. Expert opinion: Although DAA failures generally occur in less than 10% of treated chronic hepatitis C patients, selection of drug resistance is the rule in most cases. HCV re-treatment options are available, but first-line therapeutic strategies should be optimized to efficiently prevent DAA failure due to baseline HCV resistance. Considerable progress is being made and next-generation DAAs are coming with pangenotypic activity and higher resistance barrier.Fil: Esposito, Isabella. Hospital Universitario La Paz; EspañaFil: Trinks, Julieta. Hospital Italiano. Instituto de Ciencias Básicas y Medicina Experimental; Argentina. Consejo Nacional de Investigaciones Científicas y Técnicas; ArgentinaFil: Soriano, Vicente. Hospital Universitario La Paz; Españ

    Distinct patterns of outcome valuation and amygdala-prefrontal cortex synaptic remodeling in adolescence and adulthood.

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    Adolescent behavior is typified by increased risk-taking, reward- and novelty-seeking, as well as an augmented need for social and environmental stimulation. This behavioral phenotype may result from alterations in outcome valuation or reward learning. In the present set of experiments, we directly compared adult and adolescent animals on tasks measuring both of these processes. Additionally, we examined developmental differences in dopamine D1-like receptor (D1R), dopamine D2-like receptor (D2R), and polysialylated neural cell adhesion molecule (PSA-NCAM) expression in animals that were trained on an effortful reward valuation task, given that these proteins play an important role in the functional development of the amygdala-prefrontocortical (PFC) circuit and mesocorticolimbic dopamine system. We found that adolescent animals were not different from adults in appetitive associative learning, but exhibited distinct pattern of responses to differences in outcome values, which was paralleled by an enhanced motivation to invest effort to obtain larger rewards. There were no differences in D2 receptor expression, but D1 receptor expression was significantly reduced in the striatum of animals that had experiences with reward learning during adolescence compared to animals that went through the same experiences in adulthood. We observed increased levels of PSA-NCAM expression in both PFC and amygdala of late adolescents compared to adults that were previously trained on an effortful reward valuation task. PSA-NCAM levels in PFC were strongly and positively associated with high effort/reward (HER) choices in adolescents, but not in adult animals. Increased levels of PSA-NCAM expression in adolescents may index increased structural plasticity and represent a neural correlate of a reward sensitive endophenotype
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