The main purpose of this article is to propose computational methods for Greeks and the multidimensional density estimation for an asset price dynamics model defined with time-changed Brownian motions. Our approach is based on an application of the Malliavin integration-by-parts formula on the...

The paper considers a linear factor model (LFM) to study the behaviour of the correlation coefficient between various stock returns during a downturn. Changing correlation is related to the tail distribution of the driving factors, which is the market for Sharpe's one-factor model. General...

A crucial assumption in the Black-Scholes theory of options pricing is the no transaction costs assumption. However, following such a strategy in the presence of transaction costs would lead to immediate ruin. This paper presents a stochastic control approach to the pricing and hedging of a...

We propose a numerical method to price corporate bonds based on the model of default risk developed by Madan and Unal. Using a perturbation approach, we derive two semi-explicit formulae that allow us to approximate the survival probability of the firm issuing the bond very efficiently. More...

This paper presents a new approximate pricing formula for European payer swaptions in the LIBOR market model using an asymptotic expansion method. The formula is very flexible, since it can be applied to a wide range of volatility functions. The formula is tested with a log-normal volatility...

We derive an arbitrage-free pricing dynamics for claims on temperature, where the temperature follows a fractional Ornstein-Uhlenbeck process. Using a fractional white noise calculus, one can express the dynamics as a special type of conditional expectation not coinciding with the classical one....