We introduce a pricing model for equity options in which sample paths follow a variance-gamma (VG) jump model whose parameters evolve according to a two-state Markov chain process. As in GARCH type models, jump sizes are positively correlated to volatility. The model is capable of justifying the...

Guaranteed withdrawal benefits are long term contracts which provide investors with equity participation while guaranteeing them a secured income stream. Due to the long investment horizons involved, stochastic volatility and stochastic interest rates are important factors to include in their...

The role that clustering in activity and/or severity plays in catastrophe modeling and derivative valuation is a key aspect that has been overlooked in the recent literature. Here, we propose two marked point processes to account for these features. The first approach assumes the points are...

Algorithmic trading (AT) and high-frequency (HF) trading, which are responsible for over 70% of US stocks trading volume, have greatly changed the microstructure dynamics of tick-by-tick stock data. In this article, we employ a hidden Markov model to examine how the intraday dynamics of the...

While the market for credit instruments grew continuously in the decade before 2008, its liquidity has dried up significantly in the current crisis, and investors have become aware of the possible consequences of being exposed to credit risk. In this thesis we address these issues by pricing...