In this paper we derive a market value for Guaranteed Annuity Optionusing martingale modeling techniques. Furthermore, we show how to construct a static replicating portfolio of vanillainterest rate swaptions that replicates the Guaranteed Annuity Option. Finally, we illustrate with historical...

Double barrier options have become popular instruments in derivative markets. Several papers_new have already analyseddouble knock-out call and put options using different methods. In a recent paper, Geman and Yor (1996) deriveexpressions for the Laplace transform of the double barrrier option...

This paper deals with the numerical approximation of backward stochastic differential equations (BSDEs). We propose a new algorithm which is based on the regression later approach. Under some regularity assumptions, the solution of a forward backward stochastic differential equation (FBSDE) can...

The Solvency II framework challenges insurers to evaluate and manage their embedded balance sheet risks appropriately. However, insurances hold balance sheet items, for which closed-form solutions and market prices are not available. Pure Monte Carlo valuation requires nested simulations, which...

This paper investigates how the market implicitly prices very long-dated cash-flows. We do this empirically, using daily market data on the 3½% War Loan, a UK infinite maturity coupon bond. We price the War Loan as an American option with 100 years of maturity. To this end, we perform daily...