Reset clauses on the strike price and maturity date are commonly found in derivative contracts, like insurance segregated funds, bonds and executive warrants. We analyze the optimal reset policy adopted by the holder of an option that possesses the reset rights on the strike price and date of...

The reload provision in an employee stock option entitles its holder to receive one new (reload) option from the employer for each share tendered as payment of strike upon the exercise of the stock option. The number of reloads allowed can be finite or infinite. The shout feature in a call...

A knock-in American option under a trigger clause is an option contract in which the option holder receives an American option conditional on the underlying asset price breaching certain trigger level (or called barrier level). We present closed form valuation formulas for knock-in American...

In response to how they are compensated, mutual fund managers who are under-performing by mid-year are likely to increase the risk of their portfolios towards the year-end. We argue that an increase in the liquidity of the stocks that managers use to shift risk can lead to an increase in the...

Most existing portfolio choice models ignore the prevalent periodic market closure and the fact that market volatility is significantly higher during trading periods. We find that market closure and the volatility difference across trading and nontrading periods significantly change optimal...

Most existing portfolio choice models ignore periodic market closure and the fact that market volatility is significantly higher during trading periods. We show that market closure and the volatility difference across trading and nontrading periods significantly change optimal trading strategies...

We are concerned with numerical solutions for the continuous-time portfolio selection with proportional transaction costs which is described as a singular stochastic control problem. The associated value function is governed by a variational inequality with gradient constraints. We propose a...

Assuming the absence of market frictions, deterministic interest rates, and certainty in dividend payouts from the stocks in the index basket, an arbitrageur can lock in the profit of a positive (negative) arbitrage basis in a stock index futures by adopting a short (long) futures strategy. In...

A knock‐in American option under a trigger clause is an option contract in which the option holder receives an American option conditional on the underlying stock price breaching a certain trigger level (also called barrier level). We present analytic valuation formulas for knock‐in American...