This paper demonstrates the use of term-structure-related securities in the design of dynamic portfolio management strategies that hedge certain systematic jump risks in asset return. Option pricing formulas based on the absence of arbitrage opportunities in this context are also developed. the...

We derive alternative representations of the McKean equation for the value of the American put option. Our main result decomposes the value of an American put option into the corresponding European put price and the early exercise premium. We then represent the European put price in a new...

<keyword>put options</keyword>, <keyword>risk measures</keyword>, <keyword>insolvency</keyword>,<keyword>coherent risk measures</keyword>, <keyword>insurance risk measures</keyword></keywordgroup><footnotegroup><history>"Manuscript received March 2000; final revision received February 2001." Copyright 2002 Blackwell Publishing, Inc. 350 Main St., Malden, MA 02148, USA, and 108 Cowley Road,Oxford, OX4, 1JF, UK..

Conditions suitable for applications in finance are given for the weak convergence (or convergence in probability) of stochastic integrals. For example, consider a sequence "S-super-n" of security price processes converging in distribution to "S" and a sequence θ-super-n of trading strategies...

This paper presents a consistent and arbitrage-free multifactor model of the term structure of interest rates in which yields at selected fixed maturities follow a parametric muitivariate Markov diffusion process with "stochastic volatility." the yield of any zero-coupon bond is taken to be a...

This paper treats the problem of consumption and portfolio choice in continuous time, with stochastic income that cannot be replicated by trading the available securities. the optimal controls and value functions are characterized in terms of the viscosity solution of the associated...