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US Yield curve has recently collapsed to its most flattened level since subprime crisis and is close to the inversion. This fact has gathered attention of investors around the world and revived the discussion of proper modeling and…
We consider option pricing using a discrete-time Markov switching stochastic volatility with co-jump model, which can model volatility clustering and varying mean-reversion speeds of volatility. For pricing European options, we develop a…
We develop a finite horizon continuous time market model, where risk averse investors maximize utility from terminal wealth by dynamically investing in a risk-free money market account, a stock written on a default-free dividend process,…
Stock price prediction has been an important research theme both academically and practically. Various methods to predict stock prices have been studied until now. The feature that explains the stock price by a cross-section analysis is…
Path integral techniques for the pricing of financial options are mostly based on models that can be recast in terms of a Fokker-Planck differential equation and that, consequently, neglect jumps and only describe drift and diffusion. We…
According to the volatility feedback effect, an unexpected increase in squared volatility leads to an immediate decline in the price-dividend ratio. In this paper, we consider the properties of stock price dynamics and option valuations…
This paper mainly discusses the American option's hedging strategies via binomialmodel and the basic idea of pricing and hedging American option. Although the essential scheme of hedging is almost the same as European option, small…
A multi-dimensional extension of the structural default model with firms' values driven by diffusion processes with Marshall-Olkin-inspired correlation structure is presented. Semi-analytical methods for solving the forward calibration…
Option pricing models, essential in financial mathematics and risk management, have been extensively studied and recently advanced by AI methodologies. However, American option pricing remains challenging due to the complexity of…
The presence of discrete dividends complicates the derivation and form of pricing formulas even for vanilla options. Existing analytic, numerical, and theoretical approximations provide results of varying quality and performance. Here, we…
The aim of this paper is to investigate the use of close formula approximation for pricing European mortgage options. Under the assumption of logistic duration and normal mortgage rates the underlying price at the option expiry is…
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…
Based on the concept of self-decomposable random variables we discuss the application of a model for a pair of dependent Poisson processes to energy facilities. Due to the resulting structure of the jump events we can see the…
We develop a model for indifference pricing in derivatives markets where price quotes have bid-ask spreads and finite quantities. The model quantifies the dependence of the prices and hedging portfolios on an investor's beliefs, risk…
This manuscript introduces deep learning models that simultaneously describe the dynamics of several yield curves. We aim to learn the dependence structure among the different yield curves induced by the globalization of financial markets…
Valuation and parity formulas for both European-style and American-style exchange options are presented in a general financial model allowing for jumps, possibility of default and "bubbles" in asset prices. The formulas are given via…
This paper examines the valuation and hedging of standard equity protection swap (EPS) products proposed by Xu et al.. To account for financial crises and counterparty default risk, we develop pricing frameworks based on Merton's…
We re-visit the classical problem of optimal payment of dividends and determine the degree to which the diffusion approximation serves as a valid approximation of the classical risk model for this problem. Our results parallel some of those…
This paper studies the effect of quarterly earnings reports on the stock price. The profitability of the stock is modelled by geometric Brownian diffusion and the Constant Elasticity of Variance model. We fit several variations of…
Pricing formulae for defaultable corporate bonds with discrete coupons under consideration of the government taxes in the united model of structural and reduced form models are provided. The aim of this paper is to generalize the…