We examine the pricing of financial crash insurance during the 2007-2009 financial crisis in U.S. option markets, and we show that a large amount of aggregate tail risk is missing from the cost of financial sector crash insurance during the crisis. The difference in costs between...

In this paper we present two (semi)-analytic synthetic CDO tranche pricing formulas using a subordinator Levy Marshall-Olkin credit correlation model. These formulas can be easily evaluated in terms of machine computational time, therefore they are particularly suitable for the correlation model...

R&D is often a highly uncertain venture where experiments achieve successful outcomes on an extraordinarily rare basis. Just one successful product could change the future of a company; the discovery stage can often be an invaluable or disastrous experience. We develop a real R&D option model...

We present a Graphics Processing Unit (GPU) parallelization of the computation of the price of cross-currency interest rate derivatives via a Partial Differential Equation (PDE) approach. In particular, we focus on the GPU-based parallel computation of the price of long-dated foreign exchange...

We propose and study a flexible modeling framework for the joint dynamics of an index and a set of forward variance swap rates written on this index, allowing options on forward variance swaps and options on the underlying index to be priced consistently. Our model reproduces various empirically...

We consider the pricing of European structured products under a 'static' framework, particularly the Gaussian copula model (GCM). Being hedged continuously against individual spread moves with single name Credit Default Swaps, we calculate the associated replication errors. Therefore, we...

In this paper we develop a fast yet accurate formula for pricing CMS spread options in a popular class of Libor market models with stochastic volatility. This formula makes it feasible to include quoted CMS spread option prices in the general calibration procedure and by this means to recover...

Options on futures traded in Europe, Australia and South Africa are subject to futures-style premium posting (FSPP): the premium is not paid up front but marked to market, and the last settlement premium paid upon exercise. The previous literature has derived pricing models for such options....

This review article summarizes the applications of the forward shooting grid method to pricing of various types of strongly path dependent options. The forward shooting grid approach is characterized by augmenting an auxiliary state vector at each node in the usual lattice tree, which serves to...