Related papers: Pricing Variable Annuity Contracts with High-Water…
Black-Scholes implied volatility is a quantile. The insight follows from the normalized option price being a probability on the variance scale, with the inverse Gaussian distribution providing the link. It enables analytically exact and…
A new realized conditional autoregressive Value-at-Risk (VaR) framework is proposed, through incorporating a measurement equation into the original quantile regression model. The framework is further extended by employing various Expected…
We propose an enhancement to wholesale electricity markets whereby the exposure of consumers to increasingly large and volatile consumer payments arising as a byproduct of volatile real-time net loads -- i.e., loads minus renewable outputs…
We focus on the time-varying modeling of VaR at a given coverage $\tau$, assessing whether the quantiles of the distribution of the returns standardized by their conditional means and standard deviations exhibit predictable dynamics. Models…
Risk aversion and insurance are two prominent and interconnected concepts in economics and finance. To explore their fundamental connection, we introduce risk-insurance parity, which associates various classes of insurance contracts with…
We investigate methods for pricing American options under the variance gamma model. The variance gamma process is a pure jump process which is constructed by replacing the calendar time by the gamma time in a Brownian motion with drift,…
Most models for barrier pricing are designed to let a market maker tune the model-implied covariance between moves in the asset spot price and moves in the implied volatility skew. This is often implemented with a local…
We price European options in a class of models in which the volatility of the underlying risky asset depends on the short rate of interest. Our study results in an explicit pricing formula that depends on knowledge of a characteristic…
We study an optimal stopping problem with an unbounded, time-dependent and discontinuous reward function. This problem is motivated by the pricing of a variable annuity contract with guaranteed minimum maturity benefit, under the assumption…
This article proposes a calibration framework for complex option pricing models that jointly fits market option prices and the term structure of variance. Calibrated models under the conventional objective function, the sum of squared…
The aim of this work is to evaluate the cheapest superreplication price of a general (possibly path-dependent) European contingent claim in a context where the model is uncertain. This setting is a generalization of the uncertain volatility…
In this paper we study the pricing and hedging of nonreplicable contingent claims, such as long-term insurance contracts like variable annuities. Our approach is based on the benchmark-neutral pricing framework of Platen (2024), which…
Life insurance, like other forms of insurance, relies heavily on large volumes of data. The business model is based on an exchange where companies receive payments in return for the promise to provide coverage in case of an accident. Thus,…
Here we propose two alternatives to Black 76 to value European option future contracts in which the underlying market prices can be negative or mean reverting. The two proposed models are Ornstein-Uhlenbeck (OU) and continuous time GARCH…
An efficient method to price bonds with optional sinking feature is presented. Such instruments equip their issuer with the option (but not the obligation) to redeem parts of the notional prior to maturity, therefore the future cash flows…
This note develops a stochastic model of asset volatility. The volatility obeys a continuous-time autoregressive equation. Conditions under which the process is asymptotically stationary and possesses long memory are characterised.…
Valuation adjustments are nowadays a common practice to include credit and liquidity effects in option pricing. Funding costs arising from collateral procedures, hedging strategies and taxes are added to option prices to take into account…
We present a general approach to the pricing of products in finance and insurance in the multi-period setting. It is a combination of the utility indifference pricing and optimal intertemporal risk allocation. We give a characterization of…
In the hypothesis of rare loss events, the general expression of the policy value has been determined as a functional of the "expected frequency / loss severity" function and of the retention function. Exponential disutility has been chosen…
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…