This paper presents the analysis and valuation of an individual, temporary, and leveled-prime life insurance. It starting point is an analogy between contract rules and a financial exotic option. In particular, a cash or nothing option. Several cases are presented from a person with different...

A new class of foreign equity option pricing model is suggested that not only allows for the volatility but also for the correlation coefficient to vary stochastically over time. A modified Jacobi process is proposed to evaluate risk premium of the stochastic correlation, and a partial...

If a probability distribution is sufficiently close to a normal distribution, its density can be approximated by a Gram/Charlier Series A expansion. In option pricing, this has been used to fit risk-neutral asset price distributions to the implied volatility smile, ensuring an arbitrage-free...

This paper presents the analysis and valuation of an individual, temporary, and leveled-prime life insurance. It starting point is an analogy between contract rules and a financial exotic option. In particular, a cash or nothing option. Several cases are presented from a person with different...

Experimental evidence and opinions of market professionals suggest that people rely on mental accounting while valuing a call option. I show that mental accounting generates a closed-form alternative to the Black Scholes formula that does not require a complete market. The new formula is...

Many derivatives products are directly or indirectly associated with integrated diffusion processes. We develop a general perturbation method to price those derivatives. We show that for any positive diffusion process, the hitting time of its integrated process is approximately normally...

We develop an approximation technique for pricing finite-maturity timer options under Heston-like stochastic volatility models. By approximating the distributions of the accumulated variance and the random variance budget exceeding time, we obtain analytic expressions for timer option prices...

Most of the assets on the balance sheet of typical banks are illiquid. This exposes banks to liquidity risk, which is one of the key risks for banks. Since the value of assets is determined by their risks, liquidity risk should be included in valuation. This paper develops a valuation framework...

Spanish Abstract: En esta investigación se describen los distintos mercados de swaps y se desarrollan varias fórmulas de valuación sobre los supuestos de equilibrio general y ausencia de riesgo crédito. La mayoría de estos contratos pueden analizarse como la diferencia entre dos bonos...

A time-changing volatility binomial tree to price European options is presented followed by an algorithm explaining how to implement the tree. Finally, the advantages of the model are listed and a simulation is carried out showing that the distribution of prices simulated along the tree is...