This paper studies a valuation framework for financial contracts subject to reference and counterparty default risks with collateralization requirement. We propose a fixed point approach to analyze the mark-to-market contract value with counterparty risk provision, and show that it is a unique...

This paper studies the problem of understanding implied volatilities from options written on leveraged exchanged-traded funds (LETFs), with an emphasis on the relations between LETF options with different leverage ratios. We first examine from empirical data the implied volatility skews for LETF...

We study an option pricing framework that accounts for the price impact of an earnings announcement (EA), and analyze the behavior of the implied volatility surface prior to the event. On each known announcement date, we introduce a random jump to the stock price. Applying this idea to extend...

We analyze the American option valuation problem with the forward performance criterion introduced by Musiela and Zariphopoulou (2008). In this framework, utility evolves forward in time without reference to a specific future time horizon. Moreover, risk preferences change with stochastic market...

We study the optimal timing of derivative purchases in incomplete markets. In our model, an investor attempts to maximize the spread between her model price and the offered market price through optimally timing her purchase. Both the investor and the market value the options by risk-neutral...

Investors often control risk exposure by trading options. This article studies the optimal strategy for liquidating an option position. Under both complete and incomplete market settings, we quantify the value of optimally timing to liquidate, and identify the situations where it is optimal to...