We give short proofs of general theorems about optimal entry and exit problems in Levy models, when payoff streams may have discontinuities and be non-monotone. As applications, we consider exit and entry problems in the theory of real options, and an entry problem with an embedded option to exit

We review popular methods for pricing European options based on the Fourier expansion of the payoff function (iFT method) and the trapezoid rule, and suggest several new efficient variations. The first variation is a group of PMwFT methods (Payoff Modification with Fourier Transform), which...

We study a stochastic version of Fudenberg and Tirole's (1985) preemption game to analyze the effects of jumps in the underlying uncertainty on equilibrium strategies. Two firms contemplate entering a new market where the demand follows a jump-diffusion process. Firms differ is the sunk costs of...

Characteristic functions of several popular classes of distributions and processes admit analytic continuation into unions of strips and open coni around the line of integration in the complex plane.The Fourier transform techniques reduces calculation of probability distributions and option...

We construct very fast and accurate methods of approximate Laplace inversion, calculation of the Wiener-Hopf factors for wide classes of Levy processes with exponentially decaying Levy densities, and pricing lookback options. In all cases, we use appropriate conformal changes of variables, which...

Exponential growth of credit default swaps market and the resulting pile of CDS contracts of notional value of $62 trillion by the end of 2007 as well as the OTC nature of the contracts are widely believed to be one of the main causes of the current crisis and its depth, because large volumes of...

We consider the Heston model with the stochastic interest rate of the CIR type and more general models with stochastic volatility and interest rates depending on two CIR - factors. Time derivative and infinitesimal generator of the process for factors that determine the dynamics of the interest...