Related papers: Indifference of Defaultable Bonds with Stochastic …
One of the risks derived from selling long term policies that any insurance company has, arises from interest rates. In this paper we consider a general class of stochastic volatility models written in forward variance form. We also deal…
In this paper we complete and extend our previous work on stochastic control applied to high frequency market-making with inventory constraints and directional bets. Our new model admits several state variables (e.g. market spread,…
This paper is concerned with stochastic impulse control problems in which the running cost changes depending on the impulse control. Because of such a dependence, it brings several difficulties when the usual dynamic programming principle…
There are many studies on development of models for analyzing some derivatives such as credit default swaps .
We analyze the relative price change of assets starting from basic supply/demand considerations subject to arbitrary motivations. The resulting stochastic differential equation has coefficients that are functions of supply and demand. We…
In this paper, we first conduct a study of the portfolio selection problem, incorporating both exogenous (proportional) and endogenous (resulting from liquidity risk, characterized by a stochastic process) transaction costs through the…
This work addresses the problem of optimal pricing and hedging of a European option on an illiquid asset Z using two proxies: a liquid asset S and a liquid European option on another liquid asset Y. We assume that the S-hedge is dynamic…
We present a class of flexible and tractable static factor models for the term structure of joint default probabilities, the factor copula models. These high-dimensional models remain parsimonious with pair-copula constructions, and nest…
We develop a model for the dynamic evolution of default-free and defaultable interest rates in a LIBOR framework. Utilizing the class of affine processes, this model produces positive LIBOR rates and spreads, while the dynamics are…
This paper is concerned with the study of insurance related derivatives on financial markets that are based on non-tradable underlyings, but are correlated with tradable assets. We calculate exponential utility-based indifference prices,…
We propose a model which can be jointly calibrated to the corporate bond term structure and equity option volatility surface of the same company. Our purpose is to obtain explicit bond and equity option pricing formulas that can be…
In this survey paper we discuss recent advances on short interest rate models which can be formulated in terms of a stochastic differential equation for the instantaneous interest rate (also called short rate) or a system of such equations…
The standard intensity-based approach for modeling defaults is generalized by making the deterministic term structure of the survival probability stochastic via a common jump process. The survival copula of the vector of default times is…
This article studies a portfolio optimization problem, where the market consisting of several stocks is modeled by a multi-dimensional jump-diffusion process with age-dependent semi-Markov modulated coefficients. We study risk sensitive…
In this paper, we consider the problem of optimal investment by an insurer. The insurer invests in a market consisting of a bank account and $m$ risky assets. The mean returns and volatilities of the risky assets depend nonlinearly on…
In this paper, a pricing formula for volatility swaps is delivered when the underlying asset follows the stochastic volatility model with jumps and stochastic intensity. By using Feynman-Kac theorem, a partial integral differential equation…
We determine the optimal robust investment strategy of an individual who targets at a given rate of consumption and seeks to minimize the probability of lifetime ruin when she does not have perfect confidence in the drift of the risky…
In this paper incomplete-information models are developed for the pricing of securities in a stochastic interest rate setting. In particular we consider credit-risky assets that may include random recovery upon default. The market…
Equity default-swaps pay the holder a fixed amount of money when the underlying spot level touches a (far-down) barrier during the life of the instrument. While most pricing models give reasonable results when the barrier lies within the…
In this paper, we consider the robust optimal reinsurance investment problem of the insurer under the $\alpha$-maxmin mean-variance criterion in the defaultable market. The financial market consists of risk-free bonds, a stock and a…