Based on the works of Brockman and Turtle (2003) and Giesecke (2004), we proposed in this study a hybrid barrier option model with corporate capital gains tax which is free of problems within the structural model in explaining observed credit spreads. Our approach does not predict credit spreads that are too low for investment grade corporate bonds; neither does it predict credit spreads that a...

Certified safe control is a growing challenge in robotics, especially when performance and safety objectives must be concurrently achieved. In this work, we extend the barrier state (BaS) concept, recently proposed for stabilization of continuous time systems, to embedded trajectory optimization discrete systems using states (DBaS). The constructed DBaS into model safety-critical system integra...

First passage model specifies a credit default, when the underlying drops below a certain barrier. An investment failure often occurs unexpectedly and involves significant losses to the project value, which makes a great similarity to a default event preventing the investor paying back its debt. In this paper we aim to link the two theories, where an investment failure is determined through the...

A knock-in American option under a trigger clause is an option contract in which the option holder receives an American option conditional on the underlying stock price breaching a certain trigger level (also called barrier level). We present analytic valuation formulas for knock-in American options under the Black-Scholes pricing framework. The price formulas possess different analytic represe...

This paper examines option pricing in a universe in which it is assumed that markets are incomplete. It derives multiperiod discrete time option bounds based on stochastic dominance considerations for a risk-averse investor holding only the underlying asset, the riskless asset and (possibly) the option for any type of underlying asset distribution, discrete or continuous. It then considers the ...

We present the method of moments approach to pricing barrier-type options when the underlying is modelled by a general class of jump diffusions. By general principles the option prices are linked to certain infinite dimensional linear programming problems. Subsequently approximating those systems by finite dimensional linear programming problems, upper and lower bounds for the prices of such op...

We study a discrete time hedging and pricing problem in a market with liquidity costs. Using Leland’s discrete time replication scheme [Leland, H.E., 1985. Journal of Finance, 1283–1301], we consider a discrete time version of the Black–Scholes model and a delta hedging strategy. We derive a partial differential equation for the option price in the presence of liquidity costs and develop a modi...

Wind energy projects represent, currently, a valid opportunity to support United Nations Sustainable Development Goal 7. However, these can appear financially unattractive considering the unfavorable meteorological conditions, uncertain electricity market price, demand, unpredictable project performance, riskiness of investment stages, etc. This paper provides real options pricing model applied...