All the financial practitioners are working in incomplete markets full of unhedgeable risk-factors. Making the situation worse, they are only equipped with the imperfect information on the relevant processes. In addition to the market risk, fund and insurance managers have to be prepared for...

In the paper, we propose a new calculation scheme for American options in the framework of a forward backward stochastic di erential equation (FBSDE). The well-known decomposition of an American option price with that of a European option of the same maturity and the remaining early exercise...

This paper presents a new asymptotic expansion method for pricing continuously monitoring barrier options. In particular, we develops a semi-group expansion scheme for the Cauchy-Dirichlet problem in the second-order parabolic partial differential equations (PDEs) arising in barrier option...

A graph-theoretic framework is developed to study decentralized settlement in a general payment network. This paper argues settlement efficiency through examining how much settlement fund needs to be provided to settle all given obligations. Observing that required amount of settlement fund...

In the paper, we propose a new calculation scheme for American options in the framework of a forward backward stochastic differential equation (FBSDE). The wellknown decomposition of an American option price with that of a European option of the same maturity and the remaining early exercise...

This paper studies impacts of imperfect collateralization on derivatives values. Firstly, we present a general framework for the analysis in a multi-dimensional diffusion setting, and then calclate pre-default values of forwards and options for the numerical experiments. In particular, we...

This paper provides the optimal position management strategy for a market maker who has to face uncertain customer orders in an "illiquid" market, where the market maker’s continuous trading through a traditional exchange incurs stochastic linear price impacts. In addition, it is supposed...

Many observers describe the last 20 years of the Japanese economy as "the Two Lost Decades". Many also discuss the "bad loans" in the banking sector and the "insufficient"and "delayed" "disposal of the bad loans." They urge policies that will accelerate that disposition. Observers have also...

This paper develops a new scheme for improving an approximation method of a probability density function, which is inspired by the idea in best approximation in an inner product space. Moreover, we apply "Dykstra's cyclic projections algorithm" for its implementation. Numerical examples for...