Options paying the product of put and/or call option payouts at different strikes on two underlying assets are observed to synthesize joint densities and replicate differentiable functions of two underlying asset prices. The pricing of such options is undertaken from three perspectives. The...

A Markov chain with an expanding non-uniform grid matching risk neutral marginal distributions is constructed. Conditional distributions of the chain are in the variance gamma class with prespecified skewness and excess kurtosis. Time change and space scale volatilities are calibrated from...

Options paying the product of put and or call option payouts at different strikes on two underlying assets are observed to synthesize joint densities and replicate differentiable functions of two underlying asset prices. The pricing of such options is undertaken from three perspectives. The...

Two price economy principles motivate measuring risk by the cost of acquiring the opposite of the centered or pure risk position at its upper price. Asymmetry in returns leads to differences in risk charges for short and long positions. Short risk charges dominate long ones when the upper tail...

Corporations are viewed as perpetual derivatives securities with cash flows defined by deterministic functions of state variables. In time homogeneous and Markovian contexts the valuation of corporate is given by a deterministic function of the state variables. The resulting value function...

A portfolio diversification index is defined as the ratio of an equivalent number of independent assets to the number of assets. The equivalence is based on either attaining the same diversification benefit or spread reduction. The diversification benefit is the difference in value of a value...

We contrast two different asset pricing models, where the pricing kernel either (i) increases in the volatility dimension, reflecting investors' aversion to volatility, or (ii) could be non-monotonic in volatility, reflecting heterogeneity in investors' beliefs. The two models yield opposite...

Strategies for selecting hedging measures that both respect certain market values of cash flows and yet maintain control on their distance from physical measures are advocated, proposed and implemented. The hedging criterion is the maximization of a conservative valuation of the hedged position....

Comonotone additivity for two price economy bid and ask prices motivates combining bid prices for call options with the ask prices for puts and the converse to construct two densities (termed lower and upper) reflected by these prices. Bilateral gamma models are fit to estimate these the lower...

Stationary Increment Tempered Fractional Lévy Processes (TFLP) introduced by Boniece, Didier and Sabzikar (2020) are applied to financial data. They are used to model the stochastic drift rate of a mean reverting equation. The new processes are called OU processes with a TFLP drift rate....