In this paper the term quot;good-deal pricingquot; stands for any pricing technique based on the absence of attractive investment opportunities - good deals - in equilibrium. The theory presented here shows that any such technique can be seen as a generalization of no-arbitrage pricing and that,...

Much attention has been devoted to understanding and modeling the dynamics of implied volatility curves and surfaces. This is crucial for both trading, pricing and risk management of option positions. We suggest a simple, yet flexible, model, based on a discrete and linear Kalman filter updating...

Compound option valuation formulae give rise to the summation of a series of multinormal distribution functions. This paper presents an identity on sums of nested multinormal distributions of arbitrary dimension. We show that this identity generalizes some well-known low order identities for the...

This article presents a model of commodity price dynamics under the risk‐neutral measure where the spot price switches between two distinct stochastic processes depending on whether or not inventory is being held. Specifically, the drift of the spot price is equal to the cost of carry when the...

Major financial lease contracts are commonly written on a variable interest rate basis. The conditions of this sort of lease include an interest rate variation clause which provides for adjustments to be made to the rentals when interest rates change. Such adjustments are usually made...