Developed countries apply different security mechanisms in regulation to protect pension benefits: solvency requirements, a pension guarantee fund, and sponsor support. We compare these mechanisms for a generalized form of hybrid pension schemes. We calculate the expected log return for the...

Options should play an important role in asset allocation. They allow for kernel spanning and provide access to additional (priced) risk factors such as stochastic volatility and negative jumps. Unfortunately, traditional methods of asset allocation (e.g. mean-variance optimization) are not...

We analyse the profit-and-loss (P&L) of delta-hedging strategies for vanilla options in the presence of the implied volatility skew and derive an approximation for the P&L under the quadratic parametrization of the implied volatility. We apply this approximation to study the P&L of a straddle, a...

Developed countries apply different security mechanisms in regulation to protect defined pension benefits: solvency requirements, a pension guarantee fund, and sponsor support. We test the performance of these mechanisms in terms of the protection offered to pension benefits in relation to the...

We investigate the effect of including variance derivatives as calibration and hedging instruments for pricing and hedging exotic structures. This is studied empirically using market data for SPX and VIX derivatives applied in a stochastic volatility jump diffusion model

Investors often control risk exposure by trading options. This article studies the optimal strategy for liquidating an option position. Under both complete and incomplete market settings, we quantify the value of optimally timing to liquidate, and identify the situations where it is optimal to...

Convexity correction arises when one computes the expected value of an interest rate index under a probability measure other than its own natural martingale measure. As a typical example, the natural martingale measure of the swap rate is the swap measure with annuity as the numeraire. However,...