Spread options are multi-asset options whose payoffs depend on the difference of two underlying financial variables. In most cases, analytically closed form solutions for pricing such payoffs are not available, and the application of numerical pricing methods turns out to be non-trivial. We...

The regime switching rough Heston model has two important features on different time scales. The regime switching is motivated by changes in the long term behaviour. The parameter of the model might change over time due to macro-economic reasons. Therefore we introduce a Markov chain to model...

Explicitly taking into account the risk incurred when borrowing at a shorter tenor versus lending at a longer tenor ("roll-over risk"), we construct a stochastic model framework for the term structure of interest rates in which a frequency basis (i.e. a spread applied to one leg of a swap to...

In the current paper, we develop a methodology to price lookback options for cryptocurrencies. We propose a discretely monitored window average lookback option, whose monitoring frequencies are randomly selected within the time to maturity, and whose monitoring price is the average asset price...

We propose a novel stochastic modeling framework for coal production and logistics using option pricing theory. The problem of valuing the inherent real optionality a coal producer has when mining and processing thermal coal is modelled as pricing spread options of three assets under the...

This paper analyses the attributes and the significance of the roughness of oil market volatility. We employ unspanned stochastic volatility models driven by rough Brownian motions that yield semi-analytical prices for futures options entailing efficient calibration applications. By performing a...

We present an application of Financial Mathematics (using Real Option Analysis) to value the inherent optionality a coal producer has when mining and processing thermal coal. The pay-off of the physical option can be modelled as a spread option, whereby both the underlyings, and more unusually,...

The present paper provides empirical studies to estimate defaultable bonds in the South African financial market. The main goal is to estimate the unobservable factors affecting bond yields for South African major banks. The maximum likelihood approach is adopted for the estimation methodology....