In this note we prove a simple formula to compute the Incremental Volatility, i.e. the change in the portfolio volatility due to the removal of one asset from the portfolio. The common practice adopted in the literature and in the industry is to avoid the full recalculation of the portfolio...

We develop a novel, workable switching option model approach to component redesign and replacement projects that are divisible into sequential phases. The component manufacturer has the option to retain the current product position and abandon the project, or switch to a redesigned product...

In this work we perform a pricing exercise of different types of spread options; we particularly focus on European calendar and crack spread options. We present the expressions followed by the joint characteristic functions of the underlying log-prices for a panel of bivariate processes. The...

Mean reversion, stochastic volatility, convenience yield and presence of jump clustering are well documented salient features of commodity markets, where Asian options are very popular. We propose a model which takes into account all these stylized features. We first state our model under the...