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In this paper, we elaborate a formula for determining the optimal strike price for a bond put option, used to hedge a position in a bond. This strike price is optimal in the sense that it minimizes, for a given budget, either Value-at-Risk or Tail Value-at-Risk. Formulas are derived for both...
Persistent link: https://www.econbiz.de/10004982977
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In this paper we present in a general setting lower and upper bounds for the stop-loss premium of a (stochastic) sum of dependent random variables. Therefore, use is made of the methodology of comonotonic variables and the convex ordering of risks, introduced by Kaas et al. (2000) and Dhaene et...
Persistent link: https://www.econbiz.de/10012734764
In this paper, we investigate an optimization problem related to super-replicating strategies for European-type call options written on a weighted sum of asset prices, following the initial approach in Chen et al. (2008). Three issues are investigated. The first issue is the (non-)uniqueness of...
Persistent link: https://www.econbiz.de/10013033610
In this paper we investigate the approximations for the distribution function of a sum S of lognormal random variables. These approximations are obtained by considering the conditional expectation E[SΛ] of S with respect to a conditioning random variable Λ.The choice of Λ is crucial in order...
Persistent link: https://www.econbiz.de/10009460065
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Inspired by the ideas of Rogers and Shi [J. Appl. Prob. 32 (1995) 1077], Chalasani et al. [J. Comput. Finance 1(4) (1998) 11] derived accurate lower and upper bounds for the price of a European-style Asian option with continuous averaging over the full lifetime of the option, using a...
Persistent link: https://www.econbiz.de/10009459913
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In this paper we investigate the consequences on the pricing of insurance contingent claims when we relax the typical independence assumption made in the actuarial literature between mortality risk and interest rate risk. Starting from the Gaussian approach of Liu et al. (2014), we consider more...
Persistent link: https://www.econbiz.de/10013014519