In recent years, we have observed the dramatic increase of the use of collateral as an important credit risk mitigation tool. It has become even rare to make a contract without collateral agreement among the major financial institutions. In addition to the significant reduction of the...

This paper proposes a new approximation method of pricing barrier and average options under stochastic volatility environment by applying an asymptotic expansion approach. In particular, a high-order expansion scheme for general multi-dimensional diffusion processes is effectively applied....

This paper proposes a new approximation method of pricing barrier and average options under stochastic volatility environment by applying an asymptotic expansion approach. In particular, a high-order expansion scheme for general multi-dimensional diffusion processes is effectively applied....

This paper proposes a new approximation formula for pricing average options on commodities under a stochastic volatility environment. In particular, it derives an option pricing formula under Heston and an extended lambda-SABR stochastic volatility models (which includes an extended SABR model...

This paper proposes a new approximation formula for pricing average options on commodities under a stochastic volatility environment. In particular, it derives an option pricing formula under Heston and an extended lambda-SABR stochastic volatility models (which includes an extended SABR model...

An asymptotic expansion scheme in finance initiated by Kunitomo and Takahashi [6] and Yoshida [29] is a widely applicable methodology for analytic approximation of the expectation of a certain functional of diffusion processes. Mathematically, this methodology is justified by Watanabe...

This paper provides a new hedge fund replication method, which extends Kat and Palaro (2005) and Papageorgiou, Remillard and Hocquard (2008) to multiple trading assets with both long and short positions. The method generates a target payoff distribution by the cheapest dynamic portfolio. It is...

Recently, not only academic researchers but also many practitioners have used the methodology so-called "an asymptotic expansion method" in their proposed techniques for a variety of financial issues. e.g. pricing or hedging complex derivatives under high-dimensional stochastic environments....

This paper proposes a new approximation method for pricing barrier options with discrete monitoring under stochastic volatility environment. In particular, the integration-by-parts formula and the duality formula in Malliavin calculus are effectively applied in an asymptotic expansion approach....

The recent financial crisis caused dramatic widening and elevated volatilities among basis spreads in cross currency as well as domestic interest rate markets. Furthermore, the wide spread use of cash collateral, especially in fixed income contracts, has made the effective funding cost of...