We review the nature of some well-known phenomena such as volatility smiles, convexity adjustments and parallel derivative markets. We propose that the market is incomplete and postulate the existence of intrinsic risks in every contingent claim as a basis for understanding these phenomena. In a...

We study risk-minimization for a large class of insurance contracts. Given that the individual progress in time of visiting an insurance policy's states follows an F-doubly stochastic Markov chain, we describe different state-dependent types of insurance benefits. These cover single payments at...

In this paper, we consider a generic interest rate market in the presence of roll-over risk, which generates spreads in spot/forward term rates. We do not require classical absence of arbitrage and rely instead on a minimal market viability assumption, which enables us to work in the context of...

The significant excess of the price of risk, research question in the version paper, [S. Chule, in Applied Mathematical Finance, submitted June 2016], is space-domain form re-evaluated into the stochastic problem objective of the premium risk. The adapts of the conventional generic replication...

In this paper we study the stochastic area swept by a regular time-homogeneous diffusion till a stopping time. This unifies some recent literature in this area. Through stochastic time change we establish a link between the stochastic area and the stopping time of another associated...

In this paper, we adopt a partial differential equation (PDE) approach to calculate price and risk measures for mortgage backed securities (MBS). The interest rate path-dependency is handled by an augmented state variable with discrete updating. Compared with the Monte Carlo method, valuation...

In this paper we study the Omega risk model with surplus-dependent tax payments in a time-homogeneous diffusion setting. The new model incorporates practical features from both the Omega risk model(Albrecher and Gerber and Shiu (2011)) and the risk model with tax(Albrecher and Hipp (2007)). We...

We introduce a model in which a regulator employs mechanism design to embed her human capital beta signal(s) in a firm's capital structure, in order to enhance the value of her post career change indexed executive stock option contract with the firm. We prove that the agency cost of this...

We derive robust good-deal hedges and valuations under combined model ambiguity about the drift and volatility of asset prices for incomplete markets. Good-deal valuations are determined such that not just opportunities for arbitrage but also for overly attractive reward-to-risk ratios are...