证券定价
Constant Proportion Portfolio Insurance (CPPI) is an investment strategy designed to give participation in the performance of a risky asset while protecting the invested capital. This protection is however not perfect and the gap risk must…
The generalized 5D Black-Scholes differential equation with stochastic volatility is derived. The projections of the stochastic evolutions associated with the random variables from an enlarged space or superspace onto an ordinary space can…
The purpose of this paper is introducing rigorous methods and formulas for bilateral counterparty risk credit valuation adjustments (CVA's) on interest-rate portfolios. In doing so, we summarize the general arbitrage-free valuation…
We study the effect of parameters uncertainties on a stochastic diffusion model, in particular the impact on the pricing of contingent claims, thanks to Dirichlet Forms methods. We apply recent techniques, developed by Bouleau, to hedging…
We apply a quadratic hedging scheme developed by Foellmer, Schweizer, and Sondermann to European contingent products whose underlying asset is modeled using a GARCH process and show that local risk-minimizing strategies with respect to the…
Recently, a novel adaptive wave model for financial option pricing has been proposed in the form of adaptive nonlinear Schr\"{o}dinger (NLS) equation [Ivancevic a], as a high-complexity alternative to the linear Black-Scholes-Merton model…
Mandatory emission trading schemes are being established around the world. Participants of such market schemes are always exposed to risks. This leads to the creation of an accompanying market for emission-linked derivatives. To evaluate…
This work illustrates how several new pricing formulas for exotic options can be derived within a Levy framework by employing a unique pricing expression. Many existing pricing formulas of the traditional Gaussian model are obtained as a…
We propose a probabilistic framework for pricing derivatives, which acknowledges that information and beliefs are subjective. Market prices can be translated into implied probabilities. In particular, futures imply returns for these implied…
The valuation process that economic agents undergo for investments with uncertain payoff typically depends on their statistical views on possible future outcomes, their attitudes toward risk, and, of course, the payoff structure itself.…
We propose a hybrid model of portfolio credit risk where the dynamics of the underlying latent variables is governed by a one factor GARCH process. The distinctive feature of such processes is that the long-term aggregate return…
We derive an arbitrage free relationship between recovery swap rates, digital default swap spreads and conventional CDS spreads, and argue that the fair forward recovery rate used in recovery swaps must contain a convexity premium over the…
Adaptive wave model for financial option pricing is proposed, as a high-complexity alternative to the standard Black--Scholes model. The new option-pricing model, representing a controlled Brownian motion, includes two wave-type approaches:…
The true probability of a European call option to achieve positive return is investigated under the Black-Scholes model. It is found that the probability is determined by those market factors appearing in the BS formula, besides the growth…
In this paper we develop an algorithm to calculate the prices and Greeks of barrier options in a hyper-exponential additive model with piecewise constant parameters. We obtain an explicit semi-analytical expression for the first-passage…
We give a comprehensive review of credit term structure modeling methodologies. The conventional approach to modeling credit term structure is summarized and shown to be equivalent to a particular type of the reduced form credit risk model,…
In the third part of this series we introduce consistent relative value measures for CDS-Bond basis trades using the bond-implied CDS term structure derived from fitted survival rate curves. We explain why this measure is better than the…
In the second part of our series we suggest new definitions of credit bond duration and convexity that remain consistent across all levels of credit quality including deeply distressed bonds and introduce additional risk measures that are…
In this three-part series of papers, we argue that the conventional spread measures are not well defined for credit-risky bonds and introduce a set of credit term structures which correct for the biases associated with the strippable cash…
In this paper we develop structural first passage models (AT1P and SBTV) with time-varying volatility and characterized by high tractability, moving from the original work of Brigo and Tarenghi (2004, 2005) [19] [20] and Brigo and Morini…