Related papers: The Log Private Company Valuation Model
The pricing of options, warrants and other derivative securities is one of the great success of financial economics. These financial products can be modeled and simulated using quantum mechanical instruments based on a Hamiltonian…
Closed form option pricing formulae explaining skew and smile are obtained within a parsimonious non-Gaussian framework. We extend the non-Gaussian option pricing model of L. Borland (Quantitative Finance, {\bf 2}, 415-431, 2002) to include…
We propose an option approach for pricing bond illiquidity that is reminiscent of the celebrated work of Longstaff (1995) on the non-marketability of some non-dividend-paying shares in IPOs. This approach describes a quite common situation…
Option pricing is an integral part of modern financial risk management. The well-known Black and Scholes (1973) formula is commonly used for this purpose. This paper is an attempt to extend their work to a situation in which the…
Theoretical models applied to option pricing should take into account the empirical characteristics of the underlying financial time series. In this paper, we show how to price basket options when assets follow a shifted log-normal process…
We consider stochastic volatility models under parameter uncertainty and investigate how model derived prices of European options are affected. We let the pricing parameters evolve dynamically in time within a specified region, and…
This paper is concerned with personalized pricing models aimed at maximizing the expected revenues or profits for a single item. While it is essential for personalized pricing to predict the purchase probabilities for each consumer, these…
In this paper, we consider pricing of European options and spread options for Hawkes-based model for the limit order book. We introduce multivariate Hawkes process and the multivariable general compound Hawkes process. Exponential…
The aim of this paper is to introduce an insurance model allowing reinsurance and dividend payment. Our model deals with several homogeneous contracts and takes into account the legislation regarding the provisions to be justified by the…
Modelling all possible life cycles of a company in a highly competitive economic environment gives a significant advantage to the owner in his business investment activities. This article proposes and analyses a dynamic model of a company's…
In this article we focus on the pricing of exchange options when the dynamic of logprices follows either the well-known variance gamma or the recent variance gamma++ process introduced in Gardini et al [19]. In particular, for the former…
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…
This paper presents hedging strategies for European and exotic options in a Levy market. By applying Taylor's Theorem, dynamic hedging portfolios are con- structed under different market assumptions, such as the existence of power jump…
We study the valuation and hedging problem of European options in a market subject to liquidity shocks. Working within a Markovian regime-switching setting, we model illiquidity as the inability to trade. To isolate the impact of such…
We are concerned with the market-consistent valuation of lifelong health insurance products, which are subject to adjustments derived from the actuarial equivalence principle and driven by (medical) inflation. Such products are…
Current approaches to fair valuation in insurance often follow a two-step approach, combining quadratic hedging with application of a risk measure on the residual liability, to obtain a cost-of-capital margin. In such approaches, the…
We introduce a new method to calculate the credit exposure of European and path-dependent options. The proposed method is able to calculate accurate expected exposure and potential future exposure profiles under the risk-neutral and the…
In the papers Carmona and Durrleman [7] and Bjerksund and Stensland [1], closed form approximations for spread call option prices were studied under the log normal models. In this paper, we give an alternative closed form formula for the…
This paper introduces an information-based model for the pricing of storable commodities such as crude oil and natural gas. The model uses the concept of market information about future supply and demand as a basis for valuation. Physical…
We consider a portfolio with call option and the corresponding underlying asset under the standard assumption that stock-market price represents a random variable with lognormal distribution. Minimizing the variance (hedging risk) of the…