We study a model for default contagion in intensity-based credit risk and its consequences for pricing portfolio credit derivatives. The model is specified through default intensities which are assumed to be constant between defaults, but which can jump at the times of defaults. The model is...

The significant excess of the price of risk, research question in the version paper, [S. Chule, in Applied Mathematical Finance, submitted June 2016], is space-domain form re-evaluated into the stochastic problem objective of the premium risk. The adapts of the conventional generic replication...

The risky assets prices of the bi-variate model are reviewed under the hegemonize concentration filtered physical probability space. In the stochastic variance of the Cox-Ingersoll-Ross process. The Mean-variance hedging expanse on the Föllmer-Schweizer decomposition is stringent to the...

Mathematical finance explores the consistency relationships between the prices of securities imposed by elementary economic principles. Commonplace among these are replicability and the absence of arbitrage, both essentially algebraic constraints on the valuation map from a security to its...

Mathematical finance explores the consistency relationships between the prices of securities imposed by elementary economic principles. Commonplace among these are replicability and the absence of arbitrage, both essentially algebraic constraints on the valuation map from a security to its...

Several models of how to price synthetic CDOs are presented. The study focuses on comparison of classical Gaussian copula with NIG copula, double t-copula and gaussian stochastic correlation model. Because the the t-copula is technically the most demanding of the presented approaches and usually...

Our first aim in this paper is to introduce a futures-based model able of capturing the main features displayed by Crude Oil futures and options contracts, such as the Samuelson volatility effect and the volatility smile. We calculate the joint characteristic function of two futures contracts in...

This note discusses the impact of dividend modelling on the pricing of equity exotic derivatives under a local volatility model. It explains how the level of the implied local variance is adjusted as the contribution of proportional dividends is increased and characterises the impact of the...

Vanna-volga is a popular method for interpolation/extrapolation of volatility smiles. The technique is widely used in the FX markets context, due to its ability to consistently construct the entire lognormal smile using only three lognormal market quotes.However, the derivation of vanna-volga...

We derive closed-form expressions to price European calls and puts assuming the cash flows of the underlying asset or project are normally distributed. This approach has important advantages in the context of real options applied to infrastructure projects when compared to the Black-Scholes...