As a byproduct of the 2007-2008 credit crunch, derivatives pricing and risk management are experiencing a dramatic transformation. Assumptions that were widely accepted not long ago, like absence of counterparty credit risk and the existence of a unique risk free curve available for every...

The problem of fair pricing of contingent claims is well understood in the contex of an arbitrage free, complete financial market, with perfect information : the so-called arbitrage approach permits to construct a unique valuation operator compatible with observed price processes. In the more...

When the markets are dynamically complete and without imperfections there are three equivalent approaches in order to price a given asset : the arbitrage approach through the existence of a risk-neutral density, the utility approach through a utility maximization program and the equilibrium...

Purpose – The purpose of this paper is to propose a model for ruin-contingent life annuity (RCLA) contracts under a jump diffusion model, where the dynamics of volatility is governed by the Heston stochastic volatility framework. The paper aims to illustrate that the proposed jump diffusion...

The problem of fair pricing of contingent claims is well understood in the contex of an arbitrage free, complete financial market, with perfect information : the so-called arbitrage approach permits to construct a unique valuation operator compatible with observed price rocesses. In the more...

In this paper we derive analytic formulas for electricity derivatives under assumption that electricity spot prices follow a 3-regime Markov regime-switching model with independent spikes and drops and periodic transition matrix. Since the classical derivatives pricing methodology cannot be used...

American call and put options on the S&P 500 index futures that violate the stochastic dominance bounds of Constantinides and Perrakis (2007) over 1983-2006 are identified as potentially profitable investment opportunities. Call bid prices more frequently violate their upper bound than put bid...

A non-parametric valuation framework (ANN-MRS) using artificial neural networks for pricing financial derivatives has been developed whilst the volatility of underlying asset return dynamics are modelled by Markov regime switching model. Its immediate application is on pricing of the Chinese...

American call and put options on the S&P 500 index futures that violate the stochastic dominance bounds of Constantinides and Perrakis (2007) over 1983-2006 are identified as potentially profitable investment opportunities. Call bid prices more frequently violate their upper bound than put bid...

In a Markovian setting, we introduce a class of pricing measures and forward measures. Using multiplicative perturbation theory of Markovian semigroups, we study the relationship between the pricing semigroup and the forward semigroup, and obtain the forward semigroup pricing method....