It is commonly accepted that Commodities futures and forward prices, in principle, agree under some simplifying assumptions. One of the most relevant assumptions is the absence of counterparty risk. Indeed, due to margining, futures have practically no counterparty risk. Forwards, instead, may...

This paper considers the valuation of a spread call when asset prices are lognormal. The implicit strategy of the Kirk formula is to exercise if the price of the long asset exceeds a given power function of the price of the short asset. We derive a formula for the spread call value, conditional...

We consider counterparty risk for Credit Default Swaps (CDS) in presence of correlation between default of the counterparty and default of the CDS reference credit. Our approach is innovative in that, besides default correlation, which was taken into account in earlier approaches, we also model...

A nonparametric method of pricing American options was recently developed that requires only historical underlying price data (Alcock and Carmichael, 2008). We derive an extension to this method to include conditioning information from a small number of observed option prices. This additional...

We develop and test a fast and accurate semi-analytical formula for single-name default swaptions in the context of the shifted square root jump diffusion (SSRJD) default intensity model. The formula consists of a decomposition of an option on a summation of survival probabilities in a summation...

A convertible bond (CB) with a right of m out of n day provisional call or soft-call becomes callable given that the underlying stock closes above a pre-set trigger price for any m or more days over the n consecutive trading days up to the current day. It is computationally challenge to value...

We present the first step in a program to develop a comprehensive, unified equilibrium theory of asset and liability pricing. We give a mathematical framework for pricing insurance products in a multiperiod financial market. This framework reflects classical economic principles (like utility...

This paper provides a new approach in modelling dependent defaults within a top-down approach. First, a general framework to map the default of a set of obligors is developed by using a marked Poisson Process. Then, a characterization of the default intensity for a set of obligors is derived,...

Tutorial on valuation of mortgage backed securities and collateralized mortgage obligations, including: - Structure of the mortgage market - Prepayment modeling - OAS analysis - Interest rate modeling - Numerical methods - Parallelization

The Black-Scholes formula is often used in the backward direction to invert the implied volatility, usually with some solver method. Solver methods, being aesthetically unappealing, are also slower than closed-form approximations. However, closed-form approximations in previous works lack...