Related papers: Evaluation of equity-based debt obligations
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…
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…
We consider the pricing problem related to payoffs that can have discontinuities of polynomial growth. The asset price dynamic is modeled within the Black and Scholes framework characterized by a stochastic volatility term driven by a…
In this short paper we introduce a new class of performance measures based on certainty equivalents defined via scaled utility functions. We analyse their properties, show that the corresponding portfolio optimization problem is well-posed…
This paper is concerned with the decoupling of delayed linear forward-backward stochastic differential equations (D-FBSDEs), which is much more involved than the delay-free case due to the infinite dimension caused by the delay. A new…
Utility based methods provide a very general theoretically consistent approach to pricing and hedging of securities in incomplete financial markets. Solving problems in the utility based framework typically involves dynamic programming,…
In this article, we deal with fractional stochastic differential equations, so-called Caputo type fractional backward stochastic differential equations (Caputo fBSDEs, for short), and study the well-posedness of an adapted solution to…
In this work we consider the exponential utility maximization problem in the framework of semistatic hedging.
In this paper, we study reflected backward stochastic difference equations (RBSDEs for short) with finitely many states in discrete time. The general existence and uniqueness result, as well as comparison theorems for the solutions, are…
This paper describes a discrete-time model of regularly-issued sovereign debt dynamics under a deficit-driven nominal debt growth regime that explicitly accounts for granular maturity. New issuance follows fixed allocations across a finite…
Employee stock options (ESOs) are American-style call options that can be terminated early due to employment shock. This paper studies an ESO valuation framework that accounts for job termination risk and jumps in the company stock price.…
Models to price long term loans in the securities lending business are developed. These longer horizon deals can be viewed as contracts with optionality embedded in them. This insight leads to the usage of established methods from…
We deal with the problem of outsourcing the debt for a big investment, according two situations: either the firm outsources both the investment (and the associated debt) and the exploitation to a private consortium, or the firm supports the…
We present a method to formulate the unit commitment problem in energy production as quadratic unconstrained binary optimization (QUBO) problem, which can be solved by classical algorithms and quantum computers. We suggest a first approach…
Merton portfolio management problem is studied in this paper within a stochastic volatility, non constant time discount rate, and power utility framework. This problem is time inconsistent and the way out of this predicament is to consider…
We analyze conditional optimization problems arising in discrete time Principal-Agent problems of delegated portfolio optimization with linear contracts. Applying tools from Conditional Analysis we show that some results known in the…
We consider the problem of valuation of American (call and put) options written on a dividend paying stock governed by the geometric Brownian motion. We show that the value function has two different but related representations: by means of…
We propose a method to accurately and efficiently identify the constitutive behavior of complex materials through full-field observations. We formulate the problem of inferring constitutive relations from experiments as an indirect inverse…
We shall study backward stochastic differential equations and we will present a new approach for the existence of the solution. This type of equation appears very often in the valuation of financial derivatives in complete markets.…
We discuss a class of debt management problems in a stochastic environment model. We propose a model for the debt-to-GDP (Gross Domestic Product) ratio where the government interventions via fiscal policies affect the public debt and the…