Pricing of Securities
This paper investigates how to measure common market risk factors using newly proposed Panel Quantile Regression Model for Returns. By exploring the fact that volatility crosses all quantiles of the return distribution and using penalized…
We consider an American contingent claim on a financial market where the buyer has additional information. Both agents (seller and buyer) observe the same prices, while the information available to them may differ due to some extra…
Cash collateral is perfect in that it provides simultaneous counterparty credit risk protection and derivatives funding. Securities are imperfect collateral, because of collateral segregation or differences in CSA haircuts and repo…
Considering a lead-time-and price-sensitive demand, we investigate whether a client rejection policy, modeled as M/M/1/K system, can be more profitable than an all-client acceptance policy, modeled as M/M/1 system. We provide analytical…
In this paper we consider three types of embedded options in pension benefit design. The first is the Florida second election (FSE) option, offered to public employees in the state of Florida in 2002. Employees were given the option to…
We describe a model for evolving commodity forward prices that incorporates three important dynamics which appear in many commodity markets: mean reversion in spot prices and the resulting Samuelson effect on volatility term structure,…
A new framework for pricing the European currency option is developed in the case where the spot exchange rate fellows a time-changed fractional Brownian motion. An analytic formula for pricing European foreign currency option is proposed…
In this paper we treat a gas storage valuation problem as a Markov Decision Process. As opposed to existing literature we model the gas price process as a regime-switching model. Such a model has shown to fit market data quite well in Chen…
Under a generalized skew normal distribution we consider the problem of European option pricing. Existence of the martingale measure is proved. An explicit expression for a given European option price is presented in terms of the cumulative…
This paper studies arbitrage pricing theory in financial markets with implicit transaction costs. We extend the existing theory to include the more realistic possibility that the price at which the investors trade is dependent on the traded…
This paper examines the valuation of American capped call options with two-level caps. The structure of the immediate exercise region is significantly more complex than in the classical case with constant cap. When the cap grows over time,…
In this paper, we extend the 3/2-model for VIX studied by Goard and Mazur (2013) and introduce the generalized 3/2 and 1/2 classes of volatility processes. Under these models, we study the pricing of European and American VIX options and,…
This paper is concerned with the asymptotics for Greeks of European-style options and the risk-neutral density function calculated under the constant elasticity of variance model. Formulae obtained help financial engineers to construct a…
The portfolio optimization problem is a basic problem of financial analysis. In the study, an optimization model for constructing an options portfolio with a certain payoff function has been proposed. The model is formulated as an integer…
This survey paper is focused on qualitative and numerical analyses of fully nonlinear partial differential equations of parabolic type arising in financial mathematics. The main purpose is to review various non-linear extensions of the…
In this paper we propose a multi-state model for the evaluation of the conversion option contract. The multi-state model is based on age-indexed semi-Markov chains that are able to reproduce many important aspects that influence the…
In this paper, we are concerned with the valuation of Guaranteed Annuity Options (GAOs) under the most generalised modelling framework where both interest and mortality rates are stochastic and correlated. Pricing these type of options in…
The time average of geometric Brownian motion plays a crucial role in the pricing of Asian options in mathematical finance. In this paper we consider the asymptotics of the discrete-time average of a geometric Brownian motion sampled on…
We derive sharp bounds for the prices of VIX futures using the full information of S&P 500 smiles. To that end, we formulate the model-free sub/superreplication of the VIX by trading in the S&P 500 and its vanilla options as well as the…
There are many studies on development of models for analyzing some derivatives such as credit default swaps .