We consider a general framework of optimal contract design under the heterogeneity and short-termism of agents. Our research shows that the optimal contract must weigh the agent's information rent, incentive cost, and benefit to overcome the contract's adverse selection and moral hazards. Agents...

In this paper, we propose a general approximation framework for the valuation of (path-dependent) options under time-changed Markov processes. The underlying background process is assumed to be a general Markov process, and we consider the case when the stochastic time change is constructed from...

We study the fair strike of a discrete variance swap for a general time-homogeneous stochastic volatility model. In the special cases of Heston, Hull-White and Schoebel-Zhu stochastic volatility models we give simple explicit expressions (improving Broadie and Jain (2008a) in the case of the...

The Chicago Board of Options Exchange (CBOE) advocates linking variable annuity (VA) fees to its trademark VIX index in a white paper (CBOE, 2013a, b). It claims that the VIX-linked fee structure has several advantages over the traditional fixed percentage fee structure. However, the evidence...