We develop a normative framework for the optimal design, value assessment, and risk management integration of combined custom contingent claims. A risk averse firm faces a mix of financially insurable and noninsurable risk. The firm seeks optimal positioning in a pair of custom claims, one...

Many corporate commitments exhibit a combined financial exposure to both market prices and idiosyncratic size components (e.g., volume, load, or business turnover). We design a customized contract to optimally mitigate the risk of joint fluctuations in price and size terms. The hedge is sought...

In this work we perform a pricing exercise of different types of spread options; we particularly focus on European calendar and crack spread options. We present the expressions followed by the joint characteristic functions of the underlying log-prices for a panel of bivariate processes. The...