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...