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Timer options are barrier style options in the volatility space. A typical timer option is similar to its European vanilla counterpart, except with uncertain expiration date. The finite-maturity timer option expires either when the accumulated realized variance of the underlying asset has...
Persistent link: https://www.econbiz.de/10013033214
In this study, we develop a static signaling game model to examine the problem of a firm raising funds externally to finance an investment project when there is an information asymmetry between the firm and its outside investors, and the life-span of the investment project is very short....
Persistent link: https://www.econbiz.de/10012871844
Persistent link: https://www.econbiz.de/10005374643
We consider the finite-time horizon dividend-ruin model where the firm pays out dividends to its shareholders according to a dividend-barrier strategy and becomes ruined when the firm's asset value falls below the default threshold. The asset value process is modeled as a restricted Geometric...
Persistent link: https://www.econbiz.de/10005374984
We construct the contingent claims models that price participating policies with rate guarantees and default risk. These policies are characterized by the sharing of profits from an investment portfolio between the insurer and the policyholders. A certain reserve distribution mechanism is...
Persistent link: https://www.econbiz.de/10004971739
We propose three analytic approximation methods for numerical valuation of the guaranteed annuity options in deferred annuity pension policies. The approximation methods include the stochastic duration approach, Edgeworth expansion, and analytic approximation in affine diffusions. The payoff...
Persistent link: https://www.econbiz.de/10004971755
The reload provision in an employee stock option is an option enhancement that allows the employee to pay the strike upon exercising the stock option using his owned stocks and to receive new "reload" stock options. The usual Black–Scholes risk neutral valuation approach may not be appropriate...
Persistent link: https://www.econbiz.de/10004971781
Assuming the absence of market frictions, deterministic interest rates, and certainty in dividend payouts from the stocks in the index basket, an arbitrageur can lock in the profit of a positive (negative) arbitrage basis in a stock index futures by adopting a short (long) futures strategy. In...
Persistent link: https://www.econbiz.de/10011197074
Several earlier theoretical studies on the optimal issuer's calling policy of a convertible bond suggest that the issuer should call the bond as soon as the conversion value exceeds the call price. However, empirical studies on actual cases of calling by convertible bond issuers reveal that...
Persistent link: https://www.econbiz.de/10011197280
A knock‐in American option under a trigger clause is an option contract in which the option holder receives an American option conditional on the underlying stock price breaching a certain trigger level (also called barrier level). We present analytic valuation formulas for knock‐in American...
Persistent link: https://www.econbiz.de/10011197540