We study Vanna-Volga methods which are used to price first generation exotic options in the Foreign Exchange market. They are based on a rescaling of the correction to the Black–Scholes price through the so-called "probability of survival" and the "expected first exit time". Since the methods...

We study the local volatility function in the foreign exchange (FX) market, where both domestic and foreign interest rates are stochastic. This model is suitable to price long-dated FX derivatives. We derive the local volatility function and obtain several results that can be used for the...

In this paper, we study the price of Variable Annuity Guarantees, particularly those of Guaranteed Annuity Options (GAO) and Guaranteed Minimum Income Benefit (GMIB), in the settings of a derivative pricing model where the underlying spot (the fund) is locally governed by a geometric Brownian...