This paper uses the preference free framework proposed by Dybvig (1988) and Cox and Leland (1982, 2000) to analyze dynamic portfolio strategies. In general there will be a set of dynamic strategies that have the same payoff distribution. We are able to characterize a lowest cost strategy (a...

The paper develops an efficient Monte Carlo method to price discretely monitored Parisian options based on a control variate approach. The paper also modifies the Parisian option design by assuming the option is exercised when the barrier condition is met rather than at maturity. We obtain...

There is considerable interest in finding numerical methods to price Asian options. Tse and Mok (2009) have proposed a new very simple closed-form expression for the price of a fixed-strike Asian option. Unfortunately their formula is not correct. This note shows that it is incorrect and...

It is now known that the very impressive investment returns generated by Bernie Madoff were based on a sophisticated Ponzi scheme. Madoff claimed to use a split-strike conversion strategy. This strategy consists of a long equity position plus a long put and a short call. In this paper we examine...

Locally-capped products are an economically important and poorly understood category of structured financial products. These contracts combine a guaranteed payoff with a bonus equal to some accumulation of the capped periodic returns of a reference portfolio. We show that these products often...