Option pricing is a process to obtain the theoretical fair value of an option based on the factors affecting its price. Currently, the nonparametric and computational methods of option valuation are able to construct a model of the pricing formula from historical data. However, these models are generally based on a global learning paradigm, which may not be able to efficiently and accurately ca...

Performance-dependent options are financial derivatives whose payoff depends on the performance of one asset in comparison to a set of benchmark assets. In this paper, we present a novel approach for the valuation of general performance-dependent options. To this end, we use a multidimensional Black-Scholes model to describe the temporal development of the asset prices. The martingale approach ...

We analyze the prevailing valuation practices in the life settlement industry based on a sample of 11 funds that cover a large portion of the current market. The most striking result is that a majority of asset managers seem to substantially overvalue their portfolios relative to the prices of comparable transactions that have recently been closed. Drawing on market-consistent estimates with re...

We study how M&As shape analysts’ coverage decisions and whether this process reveals information about the valuation and future performance of the merged firms. Since the target firm is delisted after the M&A, we expect and find that the majority of the analysts covering the target drop their coverage of the merged firm. However, the target analysts who retain coverage provide the most accurat...

By means of local loop unbundling (LLU), the incumbent operator opens the access network connecting the customer to the central office to other operators. Other licensed operators (OLO) will use this possibility to provide customers their services. The price of the LLU-offer is set by a regulator, aiming to allow fair competition in a monopolistic market. This is typically fixed at the lowest p...

The real options approach is used to explain discounted utility anomalies as artifacts of the optimizing behavior of an individual with standard preferences, who perceives the utility from consumption in the future as uncertain. For this individual, waiting is valuable because uncertainty is revealed over time. The fair price (or compensation) that the individual agrees to pay (or accept) today...

Today’s cloud networks are shared among many tenants. Bandwidth guarantees and work conservation are two key properties to ensure predictable performance for tenant applications and high network utilization for providers. Despite significant efforts, very little prior work can really achieve both properties simultaneously even some of them claimed so. In this paper, we present QShare, an in-net...

The aim of this paper is to provide an assessment of alternative frameworks for the fair valuation of life insurance contracts with a predominant financial component, in terms of impact on the market consistent price of the contracts, the options embedded therein, and the capital requirements for the insurer. In particular, we model the dynamics of the log-returns of the reference fund using th...

We study the fair valuation of participating life insurance policies with surrender guarantees when an early default mechanism is imposed by a regulator. An insurance company is forced to be liquidated once a solvency threshold is reached before maturity. The early default regulation affects the contracts’ value not only directly via changing the contracts’ payment streams but also indirectly v...

The aim of this paper is to provide further insights into the linkages between stock market development and economic growth. When it is not possible to distinguish between investment projects with different rates of return, market valuation of those projects is an “average value” reflecting the expected return across all investment opportunities. Consequently, as in a typical lemon’s market, hi...