We consider a pension plan with the option of early retirement, and paid benefits $\Psi (S,t)$ based on salary S at the time of retirement, but with guaranteed minimum; $S=S(t)$ is a Markov process. Denote by V(S,t) the financial value of the retirement benefits; its formal definition is given...

This paper suggests a short term interest rate model. It incorporates inflation rate, market variance, market net growth rate and market volatility trend. Empirical evidence from different markets supports the model.

We consider a large insurance company whose surplus (reserve) is modeled by a Brownian motion. The company invests its surplus in stock market assets which may or may not contain an element of risk. To minimize the insurance risk there is a possibility to reinsure a part or the whole insurance...

Simple sufficient conditions for the existence of a unique equivalent martingale measure are provided. Furthermore, these conditions give us a handle on situations where an equivalent martingale measure cannot exist. The existence of a unique equivalent martingale measure is of relevance to...

An equity market is called “diverse” if no single stock is ever allowed to dominate the entire market in terms of relative capitalization. In the context of the standard Itô-process model initiated by Samuelson (1965) we formulate this property (and the allied, successively weaker notions...

A self-contained theory is presented for pricing and hedging LIBOR and swap derivatives by arbitrage. Appropriate payoff homogeneity and measurability conditions are identified which guarantee that a given payoff can be attained by a self-financing trading strategy. LIBOR and swap derivatives...