American options are considered in a market where the underlying asset follows a Variance Gamma process. A sufficient condition is given for the failure of the smooth fit principle for finite horizon call options. A second-order accurate finite-difference method is proposed to find the American...

Capital costs, fuel, operation and maintenance (O&M) costs, and electricity prices play a key role in the economics of nuclear power plants. Often standardized reactor designs are required to be locally adapted, which often impacts the project plans and the supply chain. It then becomes...

In this paper we propose an efficient Monte Carlo scheme for simulating the stochastic volatility model of Heston (1993) enhanced by a nonparametric local volatility component. This hybrid model combines the main advantages of the Heston model and the local volatility model introduced by Dupire...

Three computational techniques for approximation of counterparty exposure for financial derivatives are presented. The exposure can be used to quantify so-called Credit Valuation Adjustment (CVA) and Potential Future Exposure (PFE), which are of utmost importance for modern risk management in...

The Stochastic Alpha Beta Rho Stochastic Volatility (SABR-SV) model is widely used in the financial industry for the pricing of fixed income instruments. In this paper we develop a low-bias simulation scheme for the SABR-SV model, which deals efficiently with (undesired) possible negative values...

We construct multi-currency models with stochastic volatility (SV) and correlated stochastic interest rates with a full matrix of correlations. We first deal with a foreign exchange (FX) model of Heston-type, in which the domestic and foreign interest rates are generated by the short-rate...

We present an extension of stochastic volatility equity models by a stochastic Hull--White interest rate component while assuming non-zero correlations between the underlying processes. We place these systems of stochastic differential equations in the class of affine jump-diffusion--linear...

According to the theory proposed by Acerbi and Scandolo (2008) [<italic>Quant. Finance</italic>, 2008, <bold>8</bold>, 681--692], an asset is described by the so-called Marginal Supply--Demand Curve (MSDC), which is a collection of bid and ask prices according to its trading volumes, and the value of a portfolio is defined...

Small and medium sized reactors, SMRs, (according to IAEA, ‘small’ refers to reactors with power less than 300MWe, and ‘medium’ with power less than 700MWe) are considered as an attractive option for investment in nuclear power plants. SMRs may benefit from flexibility of investment,...

We consider the convexity correction in a multi-factor SABR type stochastic volatility model, in which the volatility and the short-term forward rate are modeled as independent factors. In general, the convexity correction is not analytically tractable in a multi-factor model, but based on the...