We propose a structural model with a joint process of tangible assets (marker) and firm status for the pricing of corporate securities. The firm status is assumed to be latent or unobservable, and default occurs when the firm status process reaches a default threshold at the first time. The...

Stochastic orders and inequalities are very useful tools in various areas of economics and finance. The purpose of this paper is to describe main results obtained so far by using the idea of stochastic orders in financial optimization. Especially, the emphasis is placed on the demand and shift...

We consider the valuation of simple and compound Ratchet equity-indexed annuities (EIAs) in the presence of stochastic interest rates. We assume that the equity index follows a geometric Brownian motion and the short rate follows the extended Vasicek model. Under a given forward measure, we...

This article shows that value-at-risk (VaR), the most popular risk measure in financial practice, has a considerable positive bias when used for a portfolio with fat-tail distribution. The bias increases with higher confidence level, heavier tails, and smaller sample size. Also, the...