The values of options on realized variance are significantly impacted by the discrete sampling of realized variance and may be substantially higher than the values of options on continuously sampled variance (or, quadratic variation). Under arbitrary stochastic volatility dynamics, we analyze...

Following a trend of sustained and accelerated growth, the VIX futures and options market has become a closely followed, active and liquid market. The standard stochastic volatility models -- which focus on the modeling of instantaneous variance -- are unable to fit the entire term structure of...

This paper concerns the pricing of American options with stochastic stopping time constraints expressed in terms of the states of a Markov process. Following the ideas of Menaldi, Robin and Sun [21] we transform the constrained into an unconstrained optimal stopping problem. The transformation...

In this paper we point out several pitfalls of the standard methodologies for quantifying operational losses. Firstly, we use Extreme Value Theory to model real heavy-tailed data. We show that using the Value-at-Risk as a risk measure may lead to a mis-estimation of the capital requirements. In...

We consider the valuation of derivative contracts on baskets where prices of single assets are Levy-like Feller processes of tempered stable type. The dependence among the marginals' jump structure is parametrized by a Levy copula. For marginals of regular, exponential Levy type in the sense of...

Risk transfer is a key risk and capital management tool for insurance companies. Transferring risk between insurers is used to mitigate risk and manage capital re- quirements. We investigate risk transfer in the context of a network environment of insurers and consider capital costs and capital...

We construct a derivative that depends on the SPY and VIX and, in this way, incorporates both the market risk premium and the variance risk premium. We show that the product's Sharpe ratio is higher than the SPY Sharpe ratio. If we invest $10000 into the product, the products' payoff is around...