This paper examines strategic investment games between two firms that compete for optimal entry in a project that generates uncertain revenue flows. Under asymmetry on both the sunk cost of investment and revenue flows of the two competing firms, we investigate the value of real investment...

The main results of this paper are the derivation of the distribution functions of occupation times under the constant elasticity of variance (CEV) process. The distribution functions can then be used to price the alpha-quantile options. We also derive fixed-floating symmetry relation for...

When an American warrant or convertible bond is called by its issuer, the holder is usually given a notice period to decide either selling the derivative back to the issuer at the call price or exercising the conversion right. Several earlier papers have shown that such notice period requirement...

Liquidity risks arise from the presence of execution time lags on execution of market orders in trading securities and quot;quantityquot; effect (liquidation discount) on security price. In this paper, we consider an investor who is holding a portfolio of stock and cash (in the form of market...

We propose three analytic approximation methods for numerical valuation of the guaranteed annuity options in deferred annuity pension policies. The approximation methods include stochastic duration approach, Edgeworth expansion and analytic approximation in affine diffusions. The payoff...

We construct the contingent claims models that price participating policies with rate guarantees, bonuses and default risk. These policies are characterized by the sharing of profits from an investment portfolio between the insurer and the policy holders. A certain surplus distribution mechanism...

A general framework is developed to analyze the optimal stopping (exercise) regions of American path dependent options with either Asian feature or lookback feature. We examine the monotone properties of the option values and stopping regions with respect to the interest rate, dividend yield and...

Upon the exercise of an employee stock option, the embedded reload provision entitles the holder to receive additional units of new options from the employer. The number of units of new options received is equal to the number of shares tendered as payment of strike and the new strike is set at...

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 cannot be adopted as the...

Reset clauses on the strike price and maturity date are commonly found in derivative contracts, like insurance segregated funds, bonds and executive warrants. We analyze the optimal reset policy adopted by the holder of an option that possesses the reset rights on the strike price and date of...