In this paper, we investigate model-independent bounds for option prices given market instruments.This super-replication problem can be written as a semi-infinite linear programming problem. As these super-replication prices can be large and the densities Q which achieve the upper bounds quite...

An enhanced option pricing framework that makes use of both continuous and discontinuous time paths based on a geometric Brownian motion and Poisson-driven jump processes respectively is performed in order to better fit with real-observed stock price paths while maintaining the analytical...

Using a “plug” figure or “slack term” within a pro forma analysis is the standard method to make a forecasted balance sheet have assets equal liabilities and equity. The plug is usually stock or long-term debt because either one or a combination of the two, are assumed to be the source...

Conventional financial advice is that net present value (NPV) is a superior investment criterion to internal rate of return (IRR) because IRR has pitfalls. Despite the pitfalls, evidence shows most practitioners continue to employ IRR as an investment criterion. Such behavior is puzzling. This...

A one-dimensional partial differential-difference equation (pdde) under forward measure is developed to value European option under jump-diffusion, stochastic interest rate and local volatility. The corresponding forward Kolmogorov partial differential-difference equation for transition...

Traditional portfolio optimization models specify placement of capital as rather irrevocably and fully at risk through investment horizon(s) or continuously. Under this constraint, asset class allocation typically serves as primary mode of diversification, pursuing risk moderation by seeking to...

We address the inverse problem of local volatility surface calibration from market given option prices. We integrate the ever-increasing ow of option price information into the well-accepted local volatility model of Dupire. This leads to considering both the local volatility surfaces and their...