We consider the hedging problem in a jump-diffusion market with correlated assets. For this purpose, we employ the locally risk-minimizing approach and obtain the hedging portfolio as a solution of a multidimensional system of linear equations. ‎This system shows that in a continuous market, independence and correlation assumptions of assets lead to the same locally risk-minimizing portfolio. ‎...

In this paper, we aim at developing a model for option pricing to reduce the risks associated with Ethiopian commodity prices fluctuations. We used the daily closed Unwashed Lekempti grade 5 (ULK5) coffee and Whitish Wollega Sesame Seed Grade3 (WWSS3) prices obtained from Ethiopia commodity exchange (ECX) market to analyse the prices fluctuations.The natures of log-returns of the prices exhibit a...

We show that for the originally ill-posed inverse problem of calibrating a localized jump-diffusion process to given option price data, Tikhonov regularization can be used to get a well-posed optimization problem. Furthermore we prove stability as well as convergence of the regularized parameters using the forward partial integrodifferential equation associated to the European call price. By pr...

The Black-Scholes(BS) model has been widely and successfully used to model the return of asset and to price financial options. Despite of its success the basic assumptions of this model, that is, Brownian motion and normal distribution are not always supported by empirical studies. Those studies showed the two empirical phenomena: (1) the asymmetric leptokurtic features, (2) the volatility smil...

If the price of an asset follows a jump diffusion process, the market is in general incomplete. In this case, hedging a contingent claim written on the asset is not a trivial matter, and other instruments besides the underlying must be used to hedge in order to provide adequate protection against jump risk. We devise a dynamic hedging strategy that uses a hedge portfolio consisting of the under...

This addendum provides a detailed proof of Theorem 6.1 in Glasserman and Merener [1], establishing the convergence order of a discretization scheme.

We consider an insurer who faces an external jump-diffusion risk that is negatively correlated with the capital returns in the financial market. We assume not only the financial market but also the risk process depend on the regime of the economy. The insurer selects investment and liability ratio policies continuously to maximize its expected utility of terminal wealth. We obtain explicit solu...

This paper develops, analyzes, and tests computational procedures for the numerical solution of LIBOR market models with jumps. We consider, in particular, a class of models in which jumps are driven by marked point processes with intensities that depend on the LIBOR rates themselves. While this formulation offers some attractive modeling features, it presents a challenge for computational work...

futures contract is one of the most important derivatives that is used in financial markets in all over the world to buy or sell an asset or commodity in the future. pricing of this tool depends on expected price of asset or commodity at the maturity date. according to this, theoretical futures pricing models try to find this expected price in order to use in the futures contract. so in this ar...