We study an option pricing framework that accounts for the price impact of an earnings announcement (EA), and analyze the behavior of the implied volatility surface prior to the event. On each known announcement date, we introduce a random jump to the stock price. Applying this idea to extend...

The growth of the exhange-traded fund (ETF) industry has given rise to the trading of options written on ETFs and their leveraged counterparts (LETFs). We study the relationship between the ETF and LETF implied volatility surfaces when the underlying ETF is modeled by a general class of...

We study an optimal multiple stopping problem driven by a spectrally negative Levy process. The stopping times are separated by constant refraction times, and the discount rate can be positive or negative. The computation involves a distribution of the Levy process at a constant horizon and...

This paper studies a class of optimal multiple stopping problems driven by Levy processes. Our model allows for a negative effective discount rate, which arises in a number of financial applications, including stock loans and real options, where the strike price can potentially grow at a higher...

Commodity exchange-traded funds (ETFs) are a significant part of the rapidly growing ETF market. They have become popular in recent years as they provide investors access to a great variety of commodities, ranging from precious metals to building materials, and from oil and gas to agricultural...

This paper studies the risk-adjusted optimal timing to liquidate an option at the prevailing market price. In addition to maximizing the expected discounted return from option sale, we incorporate a path-dependent risk penalty based on shortfall or quadratic variation of the option price up to...

We study the portfolio problem of maximizing the outperformance probability over a random benchmark through dynamic trading with a fixed initial capital. Under a general incomplete market framework, this stochastic control problem can be formulated as a composite pure hypothesis testing problem....

Employee stock options (ESOs) are American-style call options that can be terminated early due to employment shock. This paper studies an ESO valuation framework that accounts for job termination risk and jumps in the company stock price. Under general Levy stock price dynamics, we show that a...

Motivated by the industry practice of pairs trading, we study the optimal timing strategies for trading a mean-reverting price spread. An optimal double stopping problem is formulated to analyze the timing to start and subsequently liquidate the position subject to transaction costs. Modeling...

The energy and material processing industries are traditionally characterized by very large-scale physical capital that is custom-built with long lead times and long lifetimes. However, recent technological advancement in low-cost automation has made possible the parallel operation of large...