Interest rate guarantees seem to be included in life insurance and pension products in most countries. The exact implementations of these guarantees vary from country to country and are often linked to different distribution of investment surplus mechanisms. In this paper we first attempt to...

This paper is an empirical study of the Heath-Jarrow-Morton model using Generalized Method of Moments and Simulated Method of Moments on Danish bond and option prices. The paper implements a simulation approach to price contingent claims written on purely interest rate-dependent securities...

In this article we develop a model to analyze patent-protected R&D investment projects when there is (imperfect) competition in the development and marketing of the resulting product. The competitive interactions that occur substantially complicate the solution of the problem since the decision...

We develop a new approach to dealing with real options problems with uncertain maturity. This type of situation is typical for R&D investments and mine or oil exploration projects. These types of projects are characterized by significant on-going investment costs until completion. Since time to...

In this article we develop a model to analyze patent-protected R&D investment projects when there is (imperfect) competition in the development and marketing of the resulting product. The competitive interactions that occur substantially complicate the solution of the problem since the decision...

We develop a model to value options on commodity futures in the presence of stochastic interest rates as well as stochastic convenience yields. In the development of the model, we distinguish between forward and future convenience yields, a distinction that has not been recognized in the...

We consider a dynamic trade-off model of a firm's capital structure with debt renegotiation. Debt holders only accept restructuring offers from equity holders backed by threats which are in the equity holders' own interest to execute. Our model shows that in a complete information model in which...

The paper analyzes a barrier exchange option that is knocked out the first time the two underlying assets have identical market values. Under rather general conditions regarding the price processes for the underlying assets, probably the world’s simplest option pricing formula is derived. It...

This article integrates aspects of traditional insurance with advances in financial economics, yielding proper valuation and premium assessments of insurance benefits linked to various financial assets. Several new types of unit-linked life insurance contracts are discussed, with substantial...