Simulation has proved to be a valuable tool for estimating security prices for which simple closed form solutions do not exist. In this paper we present two direct methods, a pathwise method and a likelihood ratio method, for estimating derivatives of security prices using simulation. With the...

This paper aims to extend the analytical tractability of the Black-Scholes model to alternative models with arbitrary jump size distributions. More precisely, we propose a jump diffusion model for asset prices whose jump sizes have a mixed-exponential distribution, which is a weighted average of...

A callable product is a unit of capacity sold to self-selected low-fare customers who willingly grant the capacity provider the option to "call" the capacity at a prespecified recall price. We analyze callable products in a finite-capacity setting with two fare classes where low-fare customers...

Analytical tractability is one of the challenges faced by many alternative models that try to generalize the Black-Scholes option pricing model to incorporate more empirical features. The aim of this paper is to extend the analytical tractability of the Black-Scholes model to alternative models...

Brownian motion and normal distribution have been widely used in the Black--Scholes option-pricing framework to model the return of assets. However, two puzzles emerge from many empirical investigations: the leptokurtic feature that the return distribution of assets may have a higher peak and...