Related papers: Pricing Variable Annuity Contracts with High-Water…
The main purpose of this work is to derive a partial differential equation for the reserves of life insurance liabilities subject to stochastic interest rates where the benefits and premiums depend directly on changes in the interest rate…
Advertising options have been recently studied as a special type of guaranteed contracts in online advertising, which are an alternative sales mechanism to real-time auctions. An advertising option is a contract which gives its buyer a…
This article prices OTC derivatives with either an exogenously determined initial margin profile or endogenously approximated initial margin. In the former case, margin valuation adjustment (MVA) is defined as the liability-side discounted…
Exponential functionals of Brownian motion have been extensively studied in financial and insurance mathematics due to their broad applications, for example, in the pricing of Asian options. The Black-Scholes model is appealing because of…
We develop a pricing rule for life insurance under stochastic mortality in an incomplete market by assuming that the insurance company requires compensation for its risk in the form of a pre-specified instantaneous Sharpe ratio. Our…
We study some properties of the American option price in the stochastic volatility Heston model. We first prove that, if the payoff function is convex and satisfies some regularity assumptions, then the option value function is increasing…
We study convexity and monotonicity properties of option prices in a model with jumps using the fact that these prices satisfy certain parabolic integro-differential equations. Conditions are provided under which preservation of convexity…
Under the optimal withdrawal strategy of a policyholder, the pricing of variable annuities with Guaranteed Minimum Withdrawal Benefit (GMWB) is an optimal stochastic control problem. The surrender feature available in marketed products…
In this article, we combine replication pricing with expectation pricing for derivative trades that are partially collateralized by cash. The derivatives are replicated by underlying assets and cash, using repurchasing agreement (repo) and…
The paper deals with bonus-malus systems with different claim types and varying deductibles. The premium relativities are softened for the policyholders who are in the malus zone and these policyholders are subject to per claim deductibles…
Designing dynamic portfolio insurance strategies under market conditions switching between two or more regimes is a challenging task in financial economics. Recently, a promising approach employing the value-at-risk (VaR) measure to assign…
In this paper we provide a valuation formula for different classes of actuarial and financial contracts which depend on a general loss process, by using the Malliavin calculus. In analogy with the celebrated Black-Scholes formula, we aim at…
Daily Value-at-Risk (VaR) for option books requires more than an accurate quantile forecast. It first requires a precise definition of the loss target. Before any model is evaluated, the protocol must fix the book construction rule, the…
Although quantile regression to calculate risk measures has been widely established in the financial literature, when considering data observed at mixed--frequency, an extension is needed. In this paper, a model is suggested built on a…
We present an adaptive approach for valuing the European call option on assets with stochastic volatility. The essential feature of the method is a reduction of uncertainty in latent volatility due to a Bayesian learning procedure. Starting…
Credit Valuation Adjustment is a balance sheet item which is nowadays subject to active risk management by specialized traders. However, one of the most important risk factors, which is the vector of default intensities of the counterparty,…
New versions of the set-valued average value at risk for multivariate risks are introduced by generalizing the well-known certainty equivalent representation to the set-valued case. The first "regulator" version is independent from any…
One the one hand, rough volatility has been shown to provide a consistent framework to capture the properties of stock price dynamics both under the historical measure and for pricing purposes. On the other hand, market price of volatility…
Credit Valuation Adjustment captures the difference in the value of derivative contracts when the counterparty default probability is taken into account. However, in the context of a network of contracts, the default probability of a direct…
We price weather-contingent options by use of Monte Carlo simulations. After calibrating the models to fit quoted prices, we analyze bid-ask spreads in terms of correlations across markets. Results are presented for a double-trigger Weather…