We consider different approaches to the problem of numerically inverting Laplace transforms in finance. In particular, we discuss numerical inversion techniques in the context of Asian option pricing.

Margrabe provides a pricing formula for an exchange option where the distributions of both stock prices are log-normal with correlated Wiener components. Merton has provided a formula for the price of a European call option on a single stock where the stock price process contains a continuous...

This paper considers a modification of the well-known constant elasticity of variance model where it is used to model the growth optimal portfolio. It is shown taht, for this application, there is no equivalent risk neutral pricing methodology fails. However, a consistent pricing and hedging...

This paper describes a two-factor model for a diversifed index that attempts to explain both the leverage effect and the implied volatility skews that are characteristic of index options. Our formulation is based on an analysis of the growth optimal portfolio and a corresponding random market...

This paper considers a class of term structure models that is a parameterisation of the Shirakawa (1991) extension of the Heath, Jarrow and Morton (1992) model to the case of jump-diffusions. We consider specific forward rate volatility structures that incorporate state dependent Wiener...

This paper analyzes the dynamics of a general explicit random price process of finitely many assets in an economy with overlapping generations of heterogeneous consumers forming optimal portfolios, extending the one dimensional investigation of Bohm, Deutscher and Wenzelburger (2000). Consumers...

When simulating discrete time approximations of solutions of stochastic differential equations (SDEs), numerical stability is clearly more important than numerical efficiency or some higher order of convergence. Discrete time approximations of solutions of SDEs are widely used in simulations in...

This paper surveys some of the literature on American option pricing, in particular the representations of McKean (1965), Kim (1990) and Carr, Jarrow and Myneni (1992). It is proposed that the approach regarding the problem as a free boundary value problem, and solving this via incomplete...

This paper analyses the dynamics of a model of a share market consisting of two groups of traders: fundamentalists, who form rational expectations on the fundamental value of the asset, and chartists, who base their trading decisions on an analysis of past price trends. The model is reduced to a...