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 of the underlying asset, volatility in the average value is

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 simulated share price data. The Jump

Over the past decade there has been an increase in the amount of digital information that is available. In particular, there is now vasts amount of data that is available on social media platform such as twitter and Facebook that can be analysed to gain further insight and to establish sentiment

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 occurred during the

In the previous article we looked at how one can use Neural Networks to detect jumps present in returns of a particular stock. In this blog post, we build on the thinking established in the previous article and use a Random Forest to detect jumps present in stock market returns. I have build an

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 delta hedged is said to be delta neutral. In this blog we will look at

Modelling of financial markets is usually undertaken using stochastic process. 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 a more