pricing and hedging equity derivatives. Prominent examples include stochastic volatility models, jump diffusion models, and … satisfactorily pricing and hedging extremely long-dated claims. Since they all fall within the ambit of risk-neutral pricing, it is …

Margrabe provides a pricing formula for an exchange option where the distributions of both stock prices are log …-normal with correlated Wiener components. Merton has provided a formula for the price of a European call option on a single stock … where the stock price process contains a continuous Poisson jump component, in addition to a continuous log …

these assets. It is well-known that such markets are incomplete in the Harrison and Pliska sense. We derive a pricing … relation by adopting a Radon-Nikodym derivative based on the exponential martingale of a correlated Brownian motion process and … a multivariate compound Poisson process. The parameters in the Radon-Nikodym derivative define a family of equivalent …

benchmarked risk minimization avoids these restrictive assumptions. It employs the real world probability measure as pricing … pricing and hedging for an increasing number of not fully replicable benchmarked contingent claims. …

defaultable bond and credit default swap option price in a probability setting equipped with a sub filtration structure. The Euler …-Maruyama stochastic integral approximation and the Monte Carlo method are applied to develop a numerical algorithm for pricing. Finally …, the Antithetic Variable technique is used to reduce the variance of credit default swap option prices. …