The “buy online and pick up in store” (BOPS) mode is gaining tremendous popularity among dual-channel retailers since it is convenient for consumers and brings additional store sales to retailers. It is one of the new sales models in the era of omnichannel retail. However, given the large...

We investigate credit value adjustments (CVAs) in the presence of wrong-way risk (WWR) by introducing jumps at default to model correlation between counterparty's default and relevant risk factors. We focus on the foreign-exchange and interest-rate cases, presenting efficient CVA approximations...

We study the risk index of an additive gamble proposed in Aumann and Serrano (J. Political Econ. 116(5):810-836, 2008). We establish a generalized duality result for this index and use it to prove Yaari (J. Econ. Theory 1:315-329, 1969) alternative characterization of DARA utilities. A new...

There are several pricing and risk model applications where the assumption of a deterministic LIBOR-OIS basis can lead to severe mispricing. By modeling such a basis using a jump-diffusion process, we show how stochastic basis can impact the valuation of specific deals such as zero-coupon swaps,...

Many software firms, especially mobile app providers, offer perpetually free basic products to users, but premiums are charged for access to the additional features or functionalities. While the free offering helps capture potential customers, it might cannibalize the sales of premium goods or...

Information goods providers adopt the freemium model to increase their user base and maximize their profits. However, a serious piracy problem cannibalizes the demand for legal goods and deeply harms firms' interests. We investigate the optimal pricing of information goods under the freemium...

We derive an efficient closed-form approximation for the moment generating function of the integral of a mean-reverting stochastic process, following a linear SDE, which we call GARCH. We then consider a financial application, namely the pricing of a quanto CDS under stochastic intensity of...

We develop a new closed-form approximation method for pricing spread options. Numerical analysis shows that our method is more accurate than existing analytical approximations. Our method is also extremely fast, with computing time more than two orders of magnitude shorter than one-dimensional...

The freemium pricing model has become mainstream in the software industry. A large user base can induce positive network effects while expanding security risks associated with unpatched users. This study explores a two-stage decision problem faced by software vendors that involves a freemium...

Many efficient and accurate analytical methods for pricing American options now exist. However, while they can produce accurate option prices, they often do not give accurate critical stock prices. In this paper, we propose two new analytical approximations for American options based on the...