## Pricing Arithmetic Asian Options using Moment Matching Asian options are path-dependent options whose payoff depends on the average value of the underlying asset during a specific set of dates across the life of the option. Because the payoff of the Asian options depends on the average value Continue reading Pricing Arithmetic Asian Options using Moment Matching

## Calibrating Jump Diffusion Models using Differential Evolution Determining the correct parameter values to be used in a Jump-Diffusion model is not a trivial process (as outlined here).  In this blog post we will be using the biologically inspired differential evolution technique to calibrate a Jump-Diffusion model using Continue reading Calibrating Jump Diffusion Models using Differential Evolution

## Calibrating Financial Models using a Non-Parametric Technique Traditionally, asset returns have been modeled using diffusion processes. Diffusion processes assume that the sample path of the process being modeled is continuous. However, empirical evidence suggests that there are jumps that occur in asset returns, such as those that Continue reading Calibrating Financial Models using a Non-Parametric Technique

## An Interactive Dynamic Delta Hedging Example in R Delta hedging is a technique used by trades to reduce the directional risk of a position. This delta hedging strategy results in the reduction of the variability of the profit and loss (pnl) of the position. A position that is Continue reading An Interactive Dynamic Delta Hedging Example in R

## A Test for the Presence of Jumps in Financial Markets using Neural Networks in R Modelling of financial markets is usually undertaken using stochastic processes. Stochastic processes are collection of random variables indexed, for our purposes, by time. Examples of stochastic processes used in finance include GBM, OU, Heston Model and Jump Diffusion processes.  For Continue reading A Test for the Presence of Jumps in Financial Markets using Neural Networks in R

## Introduction to Diffusion and Jump Diffusion Processes This post is the first part in a series of posts where we will be discussing jump diffusion models. In particular, we will first introduce diffusion and jump diffusion processes (part 1/3), then we will look at how to asses if Continue reading Introduction to Diffusion and Jump Diffusion Processes