Related papers: General Price Bounds for Guaranteed Annuity Option…
In this paper we investigate the pricing problem of a pure endowment contract when the insurer has a limited information on the mortality intensity of the policyholder. The payoff of this kind of policies depends on the residual life time…
In this work we present a general representation formula for the price of a vulnerable European option, and the related CVA in stochastic (either rough or not) volatility models for the underlying's price, when admitting correlation with…
Options on baskets (linear combinations) of assets are notoriously challenging to price using even the simplest log-normal continuous-time stochastic models for the individual assets. The paper [5] gives a closed form approximation formula…
We consider economic obstacles that limit the reliability and accuracy of value-at-risk (VaR). Investors who manage large market transactions should take into account the impact of the randomness of large trade volumes on predictions of…
We compare static arbitrage price bounds on basket calls, i.e. bounds that only involve buy-and-hold trading strategies, with the price range obtained within a multi-variate generalization of the Black-Scholes model. While there is no gap…
Information-theoretic generalization bounds analyze stochastic optimization by relating expected generalization error to the mutual information between learned parameters and training data. Virtual perturbation analyses of SGD add auxiliary…
In this paper, we investigate a complex variation of the standard joint life annuity policy by introducing three distinct contingent benefits for the surviving member(s) of a couple, along with a contingent benefit for their beneficiaries…
Options are financial instruments that depend on the underlying stock. We explain their non-Gaussian fluctuations using the nonextensive thermodynamics parameter $q$. A generalized form of the Black-Scholes (B-S) partial differential…
We develop a theory for valuing non-diversifiable mortality risk in an incomplete market. We do this by assuming that the company issuing a mortality-contingent claim requires compensation for this risk in the form of a pre-specified…
In this article we investigate a state-space representation of the Lee-Carter model which is a benchmark stochastic mortality model for forecasting age-specific death rates. Existing relevant literature focuses mainly on mortality…
When a Genetic Algorithm (GA), or a stochastic algorithm in general, is employed in a statistical problem, the obtained result is affected by both variability due to sampling, that refers to the fact that only a sample is observed, and…
We consider a class of generalized capital asset pricing models in continuous time with a finite number of agents and tradable securities. The securities may not be sufficient to span all sources of uncertainty. If the agents have…
The purpose of the present paper is to incorporate stochastic interest rates into a matrix-approach to multi-state life insurance, where formulas for reserves, moments of future payments and equivalence premiums can be obtained as explicit…
We consider the robust pricing and hedging of American options in a continuous time setting. We assume asset prices are continuous semimartingales, but we allow for general model uncertainty specification via adapted closed convex…
In this paper, we propose the uncertain volatility models with stochastic bounds. Like the regular uncertain volatility models, we know only that the true model lies in a family of progressively measurable and bounded processes, but instead…
Equity-linked securities with a guaranteed return become very popular in financial markets ether as investment instruments or life insurance policies. The contract pays off a guaranteed amount plus a payment linked to the performance of a…
In the paper, the pricing of Quanto options is studied, where the underlying foreign asset and the exchange rate are correlated with each other. Firstly, we adopt Bayesian methods to estimate unknown parameters entering the pricing formula…
In this study, we discuss a machine learning technique to price exotic options with two underlying assets based on a non-Gaussian Levy process model. We introduce a new multivariate Levy process model named the generalized normal tempered…
In this paper the Buchen's pricing formulae of (higher order) asset and bond binary options are incorporated into the pricing formula of power binary options and a pricing formula of "the normal distribution standard options" with the…
Based on empirical market data, a stochastic volatility model is proposed with volatility driven by fractional noise. The model is used to obtain a risk-neutrality option pricing formula and an option pricing equation.