An equity linked life and pension insurance consists of a non-linear combination of a life and pension insurance with an investment strategy. In addition to the guaranteed payments the insured receives a bonus depending on the value of an investment strategy. The additional payment is similar to...

The extension of the Black-Scholes option pricing theory to the valuation of barrier options is reconsidered. Working in the binomial framework of CRR we show how various types of barrier options can be priced either by backward induction or by closed binomial formulas. We also consider...

Interest rate futures are basic securities and at the same time highly liquid traded objects. Despite this observation, most models of the term structure of interest rate assume forward rates as primary elements. The processes of futures prices are therefore endogenously determined in these...

The aim of the paper is to develop and compare bounds on the pricing formulas for European type discrete Asian options. The lower bound is found by conditioning the maturity payment of the Asian option by the geometric average and the bound derived can be expressed as a portfolio of delayed...

The aim of the paper is to develop pricing formulas for long term European type Asian options written on the exchange rate in a two currency economy. The exchange rate as well as the foreign and domestic zero coupon bond prices are assumed to follow geometric Brownian motions.The main emphasis...

We derive a unified model which gives closed form solutions for caps and floors written on interest rates as well as puts and calls written on zero-coupon bonds. The crucial assumption is that forward rates with a compounding period that matches the contract, which we want to price, is log...

A unit-linked insurance contract can be formulated in terms of a guaranteed amount together with a fraction of a positive excess return of a benchmark portfolio. Normally, the excess return is determined annually and accumulated until the maturity of the contract. The accumulation factor which...

The lognormal distribution assumption for the term structure of interest is the most natural way to exclude negative spot and forward rates. However, imposing this assumption on the continuously compounded interest rate has a serious drawback: expected rollover returns are infinite even if the...

Assuming constant interest rate Brennan and Schwartz (1976, 1979) obtained the rational insurance premium on an equity linked insurance contract through the application of the theory of contingent claim spricing. Further considerations with deterministic interest rate have been discussed in Aase...

The purpose of this paper is to analyse the effect of stochastic interest rates on the pricing of Asian options. It is shown that a stochastic, in contrast to a deterministic, development of the term structure of interest rates has a significant influence. The price of the underlying asset, e.g....