Contingent convertible (CoCo) bonds are characterized by forced equity conversion under either accounting or regulatory trigger. Accounting trigger occurs when the capital ratio of the issuing bank falls below some contractual threshold. Under the regulatory trigger, sometimes called the...

We consider pricing of various types of exotic discrete variance swaps, like the gamma swaps and corridor swaps, under the 3/2-stochastic volatility models with jumps. The class of stochastic volatility models (SVM) that use a constant-elasticity-of-variance (CEV) process for the instantaneous...

The Fourier transform methods provide the valuable and indispensable tools for option pricing under L´evy processes since the analytic representation of the haracteristic function of the underlying asset return is more readily available than that of the density function itself. When used...

We develop efficient fast Fourier transform algorithms for pricing and hedging discretely sampled variance products and volatility derivatives under additive processes (time-inhomogeneous L evy processes). Our numerical algorithms are non-trivial versions of the Fourier space time stepping...

This review article summarizes the applications of the forward shooting grid method to pricing of various types of strongly path dependent options. The forward shooting grid approach is characterized by augmenting an auxiliary state vector at each node in the usual lattice tree, which serves to...

The main results of this paper are the derivation of the distribution functions of occupation times under the constant elasticity of variance (CEV) process. The distribution functions can then be used to price the alpha-quantile options. We also derive fixed-floating symmetry relation for...

When an American warrant or convertible bond is called by its issuer, the holder is usually given a notice period to decide either selling the derivative back to the issuer at the call price or exercising the conversion right. Several earlier papers have shown that such notice period requirement...

Liquidity risks arise from the presence of execution time lags on execution of market orders in trading securities and quot;quantityquot; effect (liquidation discount) on security price. In this paper, we consider an investor who is holding a portfolio of stock and cash (in the form of market...

We propose three analytic approximation methods for numerical valuation of the guaranteed annuity options in deferred annuity pension policies. The approximation methods include stochastic duration approach, Edgeworth expansion and analytic approximation in affine diffusions. The payoff...

We construct the contingent claims models that price participating policies with rate guarantees, bonuses and default risk. These policies are characterized by the sharing of profits from an investment portfolio between the insurer and the policy holders. A certain surplus distribution mechanism...