Related papers: Fair Pricing of Variable Annuities with Guarantees…
We consider the Bachelier model with linear price impact. Exponential utility indifference prices are studied for vanilla European options and we compute their non-trivial scaling limit for a vanishing price impact which is inversely…
In the first quarter of 2006 Chicago Board Options Exchange (CBOE) introduced, as one of the listed products, options on its implied volatility index (VIX). This created the challenge of developing a pricing framework that can…
We propose a method for extending a given asset pricing formula to account for two additional sources of risk: the risk associated with future changes in market--calibrated parameters and the remaining risk associated with idiosyncratic…
We propose a method to assess the intrinsic risk carried by a financial position $X$ when the agent faces uncertainty about the pricing rule assigning its present value. Our approach is inspired by a new interpretation of the quasiconvex…
Recent studies have demonstrated the efficiency of Variational Autoencoders (VAE) to compress high-dimensional implied volatility surfaces into a low dimensional representation. Although this method can be effectively used for pricing…
This paper presents numerical algorithm and results for pricing a capital protection option offered by many asset managers for investment portfolios to take advantage of market growth and protect savings. Under optimal withdrawal…
We present a novel approach to the pricing of financial instruments in emission markets, for example, the EU ETS. The proposed structural model is positioned between existing complex full equilibrium models and pure reduced form models.…
We analyze the empirical performance of several non-parametric estimators of the pricing functional for European options, using historical put and call prices on the S&P500 during the year 2012. Two main families of estimators are…
This paper studies the valuation of European contingent claims with short selling bans under the equal risk pricing (ERP) framework proposed in Guo and Zhu (2017) where analytical pricing formulae were derived in the case of monotonic…
Quantification of risk positions under model uncertainty is of crucial importance from both viewpoints of external regulation and internal management. The concept of model uncertainty, sometimes also referred to as model ambiguity. Although…
In this paper we study dynamic pricing mechanisms of financial derivatives. A typical model of such pricing mechanism is the so-called g--expectation defined by solutions of a backward stochastic differential equation with g as its…
Extant literature on fair pricing methods for actuarial contexts has primarily focused on the regression setting. While such approaches are well-suited to short-term products, it is unclear how they generalize to long-term products, whose…
Value-at-risk (VaR) has been playing the role of a standard risk measure since its introduction. In practice, the delta-normal approach is usually adopted to approximate the VaR of portfolios with option positions. Its effectiveness,…
A pricing principle is introduced for non-attainable $q$-exponential bounded contingent claims in an incomplete Brownian motion market setting. The buyer evaluates the contingent claim under the ``distorted Radon-Nikodym derivative'' and…
This paper explores optimal insurance solutions based on the Lambda-Value-at-Risk ($\Lambda\VaR$). If the expected value premium principle is used, our findings confirm that, similar to the VaR model, a truncated stop-loss indemnity is…
This paper focuses on the pricing of continuous geometric Asian options (GAOs) under a multifactor stochastic volatility model. The model considers fast and slow mean reverting factors of volatility, where slow volatility factor is…
This paper develops a dynamic equilibrium model of the insurance market that jointly characterizes insurers' underwriting, investment, recapitalization, and dividend policies under model uncertainty and financial frictions. Competitive…
In this paper, we propose an equilibrium pricing model in a dynamic multi-period stochastic framework with uncertain income streams. In an incomplete market, there exist two traded risky assets (e.g. stock/commodity and weather derivative)…
We derive valuations of a portfolio of financial instruments from a securities lending perspective, under different assumptions, and show a weighting scheme that converges to the true valuation. We illustrate conditions under which our…
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…