The Sato process model for option prices is expanded to accomodate credit considerations by incorporating a single jump to default occuring at an independent random time with a Weibull distribution. Explicit formulas for bid and ask prices are derived. Liquidity considerations are captured by...

For data on market prices on 246 cliquets we consider the task of pricing these exotic options using a relatively simple path space subsequently stressed to market implied and then predicted stress levels. An additive process transitioning from a Sato process to a Levy process is formulated and...

Prudent upper and lower valuations from the literature on arbitrage free two price economies provide risk characteristics driving required returns. The risk characteristics assess the risk of price fluctuations. The difference between the upper and lower prudent valuations can be viewed as a...