We propose a new model for pricing of bonds and their options based on the short rate when the latter exhibits a step …

>For this model we look at the bond pricing problem. In order to obtain more concrete results we introduce the notion of a semi … consider the pricing problem when the modulating process can not be directly observed. It turns out that pricing in this …

Standard derivative pricing theory is based on the assumption of agents acting as price takers on the market for the …

A passport option, as introduced and marketed by Bankers Trust, is a call option on the balance of a trading account …. The strategy that this account follows is chosen by the option holder, subject to position limits. <p>We derive a … simplified form for the price of the passport option using local time. A key insight is that Tanaka's formula and the Skorokhod …

We discuss here an alternative interpretation of the familiar binomial lattice approach to option pricing, illustrating … pricing of American put options. It has often been observed that if one tries to price a barrier option using a binomial … option price as a function of time-to-go which are a common feature of binomial lattice pricing. …

correction terms enable us to use closed-form solutions for continuous option prices to approximate their discrete counterparts …

arises in the pricing of American-type derivatives. Our proof is based on probabilistic arguments. We study the minimality of …

equivalent martingale measure, absence of arbitrage and completeness are given. In the case of a complete market the pricing of …