Markets are modeled as passively accepting a convex cone of cash flows that contain the nonnegative cash flows. Different markets are modeled using different cones that reflect the clientele of the market. Conditions are established to exclude the possibility of arbitrage between markets....

Postulating additivity of bid and ask prices for claims comonotone with a long or short stock position, two pricing processes are identified from data on bid and ask prices for options. It is observed that there are two separate put call parity relations in place, with the ask price for call...

Observing that pure discount projection curves are now based on a variety of tenors leads us to enquire into the possibility of theoretically deriving tenor specific zero coupon bond prices. The question then also arises on how to construct tenor specific prices for all financial contracts....

We present a method of moments approach to pricing double barrier contracts when the underlying is modelled by a polynomial jump-diffusion. By general principles the price is linked to certain infinite dimensional linear programming problems. Subsequently approximating these by finite...

No abstract received.

We present a new numerical method to price vanilla options quickly in time-changed Brownian motion models. The method is based on rational function approximations of the Black-Scholes formula. Detailed numerical results are given for a number of widely used models. In particular, we use the...

In this paper, we develop an algorithm to calculate the prices and Greeks of barrier options in a hyper-exponential additive model with piecewise constant parameters. We obtain an explicit semi-analytical expression for the first-passage probability. The solution rests on a randomization and an...

For a large class of ℝ+ valued, continuous local martingales (Mtt ≥ 0), with M0 = 1 and M∞ = 0, the put quantity: ΠM (K,t) = E ((K - Mt)+) turns out to be the distribution function in both variables K and t, for K ≤ 1 and t ≥ 0, of a probability γM on [0,1] × [0, ∞[. In this...

This paper provides a comparison of the exponential copula Lévy model with the classical Gaussian copula model for the pricing of CDO-squared tranches. Several approximations of the recursive approach are considered: a full Monte Carlo approximation, a multivariate Normal approximation of the...

In this paper, we study a new class of tractable diffusions suitable for model's primitives of interest rates. We consider scalar diffusions with scale s′(x) and speed m(x) densities discontinuous at the level x*. We call that family of processes Self Exciting Threshold (SET) diffusions....