We propose a tractable model for the exchange rate in a target zone with realignment. The target zone exchange rate dynamics is assumed to obey a bounded regular diffusion with two-sided unattainable barriers. The realignment is modeled as a continuous-time two-state Markov chain. Under the...

In this note, we point out some errors in Section 3 of our earlier paper “Levy risk model with two-sided jumps and a barrier dividend strategy” published in Insurance: Mathematics and Economics, 50(2): 280-291, 2012. Specifically, we find that the optimal barrier does not depend on initial...

In this paper, we consider a general Levy risk model with two-sided jumps and a constant dividend barrier. We connect the ruin problem of the ex-dividend risk process with the first passage problem of the Levy process reflected at its running maximum. We prove that if the positive jumps of the...

In this paper, we introduce tractable dynamic models for financial variables (such as interest rates, foreign exchange rates, commodity prices, etc.) with capturing both jump risk and boundedness of the price fluctuation in a regulated market. For the jump risk, we use a compound Poisson process...

In this paper, we consider a class of reflected stochastic differential equations (abbr. SDEs) and we are particularly interested in some integral functionals of the solutions to the equations. We explicitly derive the Laplace transforms of those integral functionals, which are subsequently...

In this article, we consider a regulated market and explore the default events. By using a so-called reflected Ornstein-Uhlenbeck process with two-sided barriers to formulate the price dynamics, we derive the expression on the conditional default probability. In the cases of single observation...

In this paper, we model the exchange rate in a target zone by a so-called reflected Ornstein-Uhlenbeck process. A simulation-based maximum likelihood estimation strategy of the parameters involved in the model is proposed and studied. The model fits data on exchange rates in the European...