A credit-linked note (CLN) on a tranche of the CDX index (partially) protects the holder against default losses in that tranche. The holder receives a specified redemption amount at note maturity. The note is priced using market spread quotes for a matching CDS on this tranche

A callable leveraged constant maturity swap (CMS) spread note allows the holder to benefit from future changes in the spread between two swap interest rates. The issues retains the right to call the note at pre-specified times in the future. The note is priced via Monte Carlo simulation using...

Exponential Lévy processes can be used to model the evolution of various financial variables such as FX rates, stock prices, etc. Considerable efforts have been devoted to pricing derivatives written on underliers governed by such processes, and the corresponding implied volatility surfaces...

In the present paper we fill an essential gap in the Convertible Bonds pricing world by deriving a Binary Tree based model for valuation subject to credit risk. This model belongs to the framework known as Equity to Credit Risk. We show that this model converges in continuous time to the model...

Motivated by discrepancies of the Black & Scholes model with observed market data, stochastic volatility and Levy models are often seen as an alternative. These models are capable of mimicking real world price processes and replicating implied option volatilities for plain-vanilla products....

We study here the large-time behavior of all continuous affine stochastic volatility models (in the sense of Keller-Ressel) and deduce a closed-form formula for the large-maturity implied volatility smile. Based on refinements of the Gartner-Ellis theorem on the real line, our proof reveals...

Reformulating the results of del Baño Rollin, Ferreiro-Castilla, and Utzet (2010), we are able to give necessary and sufficient conditions for the moments of the stock price to exist and extend Theorem 2.1 of Forde and Jacquier (2011). Precisely Forde and Jacquier (2011) provide necessary...

We introduce a new approach to model the market smile for inflation-linked derivatives by defining the Quadratic Gaussian Year-on-Year inflation model -- the QGY model. We directly define the model in terms of a year-on-year ratio of the inflation index on a discrete tenor structure, which,...

Local volatility models are widely used to manage many exotic options in a way consistent with available market prices of vanilla options. Once calibrated, a local volatility grid can be used in numerical methods such as PDE or Monte Carlo to price and hedge exotic options consistently with...

We present efficient partial differential equation (PDE) methods for continuous time mean-variance portfolio allocation problems when the underlying risky asset follows a jump-diffusion. The standard formulation of mean-variance optimal portfolio allocation problems, where the total wealth is...