This paper proposes different diffusion processes to model herd behavior indices such as the Herd Behavior Index (HIX) or the comonotonicity index (CIX). These models arise by combining popular mean-reverting processes with simple algebraic functions mapping the definition domain of the...

A basket option is an option whose underlying is a portfolio of individual stock prices. Due to the unknown dependence structure between stocks, basket option pricing relies in general on approximations or numerical methods like Monte Carlo simulation. We propose a methodology for pricing basket...

A basket option is an option whose underlying is a portfolio of individual stock prices. Due to the unknown dependence structure between stocks, basket option pricing relies in general on approximations or numerical methods like Monte Carlo simulation. We propose a methodology for pricing basket...

In this paper we employ a one-factor Lévy model to determine basket option prices. More precisely, basket option prices are determined by replacing the distribution of the real basket with an appropriate approximation. For the approximate basket we determine the underlying characteristic...

The computation of various risk metrics is essential to the quantitative risk management of variable annuity guaranteed benefits. The current market practice of Monte Carlo simulation often requires intensive computations, which can be very costly for insurance companies to implement and take so...