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Banks and investment funds are increasingly basing their competitiveness on the quality of their quantitative technology, including programming techniques, analytical methods, and applications such as financial forecasting, option pricing, and risk management, which are all essential elements of the field of computational finance.
This paper studies the recovery rates of the defaulted bond in a regime-switching model based on Mason's theory. Regard returns during default as a perpetual American call option which has a low face value and exercised according to the business condition by the creditor. We obtain the recovery rates of the defaulted bond by discussing the optimal stopping time of the American call option, which is...
Though the price of M&A has already been studied based on classical NPV model, which is not adaptable for real uncertain situation. This paper presents a new approach of measuring the target enterprise value of M&A, consisting of two parts, one is measured by NPV model and another is measured by real options model, which can be integrated to calculate the target enterprise by introducing synergy...
In this paper, we get the pricing framework of the convertible bond (CB) with call clause in exponential variance Gamma (EVG) model rather than the classical Black-Scholes (BS) model. From numerical calculation, we conclude that the new approach does lead to a different pricing method, but the difference of prices is insignificantly and the optimal stopping strategies are exactly the same.
In a competitive market environment, business seeks to reduce cost through strategic integration. This study derives an inventory replenishment model for a two-echelon supply chain where the retailer is the leader in product price. We assume market demand is affected by price and the product deterioration. A compensation-policy model is developed to coordinate the two-echelon supply chain system to...
Option pricing is one of the challenging problems in finance. Finding the best time to exercise an option is a even more challenging problem, especially since the price of the underlying assets change rapidly. In this work, we study complex path dependent options by exploiting and extending a novel idea that we proposed earlier using a nature inspired meta-heuristic algorithm. ant colony optimization...
This paper presents a nonlinear model of a joint production - marketing problem intending at determining the unit selling price, unit marketing expenditure and economic production quantity per production cycle simultaneously. The proposed model involves some cost functions such as market share loss cost which is not regarded in similar models in the related literature. The model is a signomial geometric...
When pricing American options on multi-assets (d) by Monte Carlo methods, one usually stores the simulated asset prices at all time steps on all paths in order to determine when to exercise the options. If N time steps and M paths are used, then the storage requirement is . It is undoubtedly enormous for Monte Carlo method which needs to increase the number of simulations to improve the accuracy....
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