Mellin transforms in option pricing theory were introduced by Panini and Srivastav (2004). In this contribution, we generalize their results to European power options. We derive Black-Scholes-Merton-like valuation formulas for European power put options using Mellin transforms. Thereafter, we...

We extend a framework based on Mellin transforms and show how to modify the approach to value American call options on dividend paying stocks. We present a new integral equation to determine the price of an American call option and its free boundary using modi ed Mellin transforms. We also show...

Inspired by the theory of social imitation (Weidlich 1970) and its adaptation to financial markets by the Coherent Market Hypothesis (Vaga 1990), we present a behavioral model of stock prices that supports the overreaction hypothesis. Using our dynamic stock price model, we develop a two factor...

Even if the correct modeling of default dependence is essential for the valuation of portfolio credit derivatives, for the pricing of synthetic CDOs a one-factor Gaussian copula model with constant and equalpairwise correlationsfor all assets in the reference portfolio has become the standard...

The correct modeling of default dependence is essential for the valuation of multiname credit derivatives. However for the pricing of synthetic CDOs a one-factor Gaussian copula model with constant and equal pairwise correlations, default intensities and recovery rates for all assets in the...

We focus on a preference based approach when pricing options in a market driven by fractional Brownian motion. Within this framework we derive formulae for fractional European options using the traditional idea of conditional expectation. The obtained formulae - as well as further results -...

We develop and empirically test a continuous time equilibrium model for the pricing of oil futures. The model provides a link between no-arbitrage models and expectation oriented models. It highlights the role of sufficient inventories for oil futures pricing and for the explanation of...

In this paper, we reexamine and extend the stochastic volatility model of Stein and Stein (1991) where volatility follows a mean-reversion Ornstein-Uhlenbeck process. Using Fourier inversion techniques we are able to allow for correlation between instan-taneous volatilities and the underlying...

Simple formulas for the price of corporate discount and coupon bonds are found using the Longstaff and Schwartz valuation approach for the debt claims of a firm, where default is triggered by a special State variable: the firm's asset-to-debt-ratio. Instead of keeping the total amount of debt...

In this paper we follow a different approach by taking a first step towards an option valuation model which does not explicitly make use of unobservable State variables. Instead of using a stochastic variance variable directly, we assume that the variance of stock returns is determined by the...