The logarithm of SPX is modeled as a Sato process running at a speed proportional to the current level of the VIX. When the logarithm of the VIX is an exponential compound Poisson process with drift one may obtain exact expressions for the prices of equity options taken at an independent...

Loan spreads are analysed for two types of loans. The first takes losses at maturity only; the second one follows the formulation of CFOs (Collateralized Fund Obligations), with losses registered over the lifetime of the contract. In both cases, the implementation requires the choice of a...

When the pricing kernel is U-shaped, then expected returns of claims with payout on the upside are negative for strikes beyond a threshold, determined by the slope of the U-shaped kernel in its increasing region, and have negative partial derivative with respect to strike in the increasing...

Complex insurance risks typically have multiple exposures. Options on multiple underliers with a short maturity are employed to hedge this exposure. Hedges are illustrated for GMWBVA accounts invested in the nine sector ETF's of the US economy. The underliers are simulated risk neutrally by...

Learning the pre limited liability value process of equity claims and its relationship to the stock price is an answer to the financial jeorpardy question when observed option prices are the answer being given by the market. Constant dollar equity holder values, prior to the imposition of...

Allowing for correlated squared returns across two consecutive periods, portfolio theory for two periods is developed. This correlation makes it necessary to work with non-Gaussian models. The two period conic portfolio problem is formulated and implemented. This development leads to a mean ask...

Prudent upper and lower valuations from the literature on arbitrage free two price economies provide risk characteristics driving required returns. The risk characteristics assess the risk of price fluctuations. The difference between the upper and lower prudent valuations can be viewed as a...

Daily asset returns are modeled using self decomposable limit laws and the structure is used to estimate the density of the uncentered data. Estimates of mean returns are a byproduct of the density estimate. Estimates of mean returns via density estimation have significantly lower standard...

Risk management is developed by using implied volatilities associated with a Laplacian base density as opposed to the normal distribution. Expressions are derived for all the Laplacian greeks. The Laplacian implied volatilities and greeks are compared with their Gaussian counterparts....

Summarizing option surfaces using parametric representations, their movements are decomposed into a number of effects. Arguments are presented for treating traditional sensitivity attribution terms as regression factors leading to significant attribution improvements