We perform a thorough investigation on the analytical solvability of general stochastic volatility (SV) models with Levy jumps and propose a unified, accurate, and efficient almost exact simulation method to price various financial derivatives. Our theoretical results lay a foundation for a...

Most of the empirical studies on stochastic volatility dynamics favor the 3/2 specification over the square-root (CIR) process in the Heston model. In the context of option pricing, the 3/2 stochastic volatility model is reported to be able to capture the volatility skew evolution better than...

Most of the empirical studies on stochastic volatility dynamics favor the 3/2 specification over the square-root (CIR) process in the Heston model. In the context of option pricing, the 3/2 stochastic volatility model is reported to be able to capture the volatility skew evolution better than...

We consider pricing Guaranteed Lifelong Withdrawal Benefit (GLWB) that consists of the early phase of accumulation of benefit base and the later income phase of annuities. The most recent form of the GLWB provides flexibility in allowing additional purchases in the accumulation phase, dynamic...

We derive efficient and accurate analytical pricing bounds and approximations for discrete arithmetic Asian options under time-changed Lévy processes. By extending the conditioning variable approach, we derive the lower bound on the Asian option price and construct an upper bound based on the...

We construct efficient and accurate numerical algorithms for pricing discretely monitored barrier and Bermudan style options under time-changed Levy processes by applying the fast Hilbert transform method to the log-asset return dimension and quadrature rule to the dimension of log-activity rate...

Most of the existing pricing models of variance derivative products assume continuous sampling of the realized variance processes, though actual contractual specifications compute the realized variance based on sampling at discrete times. We present a general analytic approach for pricing...

We consider the saddlepoint approximation methods for pricing derivatives whose payoffs depend on the discrete realized variance of the underlying price process of a risky asset. Most of the earlier pricing models of variance products and volatility derivatives use the quadratic variation...

We develop efficient fast Fourier transform algorithms for pricing and hedging discretely sampled variance products and volatility derivatives under additive processes (time-inhomogeneous L evy processes). Our numerical algorithms are non-trivial versions of the Fourier space time stepping...

We derive efficient and accurate analytic approximation formulas for pricing options on discrete realized variance (DRV) under affine stochastic volatility models with jumps using the partially exact and bounded (PEB) approximations. The PEB method is an enhanced extension of the conditioning...