This book presents a market-consistent valuation framework for implicit embedded options in life insurance contracts. This framework is used to perform an empirical analysis based on more than 110,000 actual and in-force life insurance policies and with a focus on the modeling of interest rates....

Part I The Fundamentals of Derivative Security Pricing -- 1 The Stock Option Problem -- 2 Stochastic Processes for Asset Price Modelling -- 3 An Initial Attempt at Pricing an Option -- 4 The Stochastic Differential Equation -- 5 Manipulating Stochastic Differential Equations and Stochastic...

The scientific debate of recent years about option pricing with respect to fractional Brownian motion was focused on the feasibility of the no arbitrage pricing approach. As the unrestricted fractional market setting allows for arbitrage, the conventional reasoning is that fractional Brownian...

This book gives a comprehensive introduction to the modeling of financial derivatives, covering all major asset classes (equities, commodities, interest rates and foreign exchange) and stretching from Black and Scholes' lognormal modeling to current-day research on skew and smile models. The...

Mean Reversion in Commodity Prices -- Fundamentals of Derivative Pricing -- Stochastic Volatility Models -- Integration of Jump Components -- Stochastic Equilibrium Level of the Underlying Process -- Deterministic Seasonality Effects -- Conclusion

The current world financial scene indicates at an intertwined and interdependent relationship between financial market activity and economic health. This book explains how the economic messages delivered by the dynamic evolution of financial asset returns are strongly related to option prices....