We use Malliavin calculus and the Clark-Ocone formula to derive the hedging strategy of an arithmetic Asian Call option in general terms. Furthermore we derive an expression for the density of the integral over time of a geometric Brownian motion, which allows us to express hedging strategy and...

In this paper we study the question what value an agent in a generalized Black-Scholes model with partial information attributes to the complementary information. To do this, we study the utility maximization problems from terminal wealth for the two cases partial information and full...

Geometric mean reversion plays a fundamental role in economic dynamic models. While it is known, at least since Merton (1975) [9], that the equilibrium distribution of geometric mean reversion is a Gamma distribution, an explicit expression for the non-equilibrium distribution has not been...

This paper derives an analytic expression for the distribution of the average volatility $\frac{1}{T-t} \int_t^T \sigma_s^2 ds$ in the stochastic volatility model of Hull and White. This result answers a longstanding question, posed by Hull and White (Journal of Finance 42, 1987), whether such...

We study the classical geometric mean reversion process which has been used to model commodity prices by various authors in Economics and Finance. We obtain certain regularity results which guarantee positivity and the existence of a stationary distribution. More important we derive an...

We discuss how implied volatilities for OTC traded Asian options can be computed by combining Monte Carlo techniques with the Newton method in order to solve nonlinear equations. The method relies on accurate and fast computation of the corresponding vegas of the option. In order to achieve this...

We study the classical real option problem in which an agent faces the decision if and when to invest optimally into a project. The investment is assumed to be irreversible. This problem has been studied by Myers and Majd [18] for the case of a complete market, in which the risk can be perfectly...

We use Malliavin calculus and the Clark-Ocone formula to derive the hedging strategy of an arithmetic Asian Call option in general terms. Furthermore we derive an expression for the density of the integral over time of a geometric Brownian motion, which allows us to express hedging strategy and...