In this paper we apply the idea of the WKB method to derive an effective single lognormal approximation for the probability distribution of the sum of two correlated lognormal variables. An approximate probability distribution of the sum is determined in closed form, and illustrative numerical...

We have presented a new unified approach to model the dynamics of both the sum and difference of two correlated lognormal stochastic variables. By the Lie-Trotter operator splitting method, both the sum and difference are shown to follow a shifted lognormal stochastic process, and approximate...

In this paper, by means of the Lie-Trotter operator splitting method, we have presented a new unified approach not only to rigorously derive Kirk's approximation but also to obtain a generalisation for multi-asset spread options in a straightforward manner. The derived price formula for the...

In this paper, based upon the Lie-Trotter operator splitting method proposed by Lo (2014), we present a simple closed-form approximation for pricing the (three-asset) dual spread options. Illustrative numerical examples show that the proposed approximation is not only extremely fast and robust,...

In this paper we have conducted a simple variational study of the ground state of the mixed Rabi model, namely the variant of the Rabi model with both one-photon and twophoton couplings of light-matter interaction. We have shown how the spectral collapse occurs beyond the critical value of the...

The Lie-algebraic approach has been applied to solve the bond pricing problem in single-factor interest rate models. Four of the popular single-factor models, namely the Vasicek model, Cox-Ingersoll-Ross model, double square-root model, and Ahn-Gao model, are investigated. By exploiting the...

Hong Kong’s Linked Exchange Rate System (LERS) has been in operation for twenty-five years during which time many other fixed exchange rate systems have succumbed to shocks and/or speculative attacks. This fact alone suggests that the LERS is a robust system which enjoys a large measure of...

On August 11, 2015, China revamped its procedure for setting the official central parity of the renminbi (RMB) against the US dollar. Our empirical investigation suggests that the intertemporal dynamics of China's central parity shifted after this policy change, though the deviation of the RMB...

On August 11 2015, China revamped its procedure of setting the official central parity of the renminbi (RMB) against the US dollar. Our empirical investigation shows that the intertemporal dynamics of China’s central parity are not the same before and after this policy change. They are more...