In this paper we present a Laplace transform-based analytical solution for pricing double-barrier options under a flexible hyper-exponential jump diffusion model (HEM). The major theoretical contribution is that we prove non-singularity of a related high-dimensional matrix, which guarantees the existence and uniqueness of the solution. © 2009 Elsevier B.V. All rights reserved.

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...

We propose a model for valuing participating life insurance products under a generalized jumpdiffusion model with a Markov-switching compensator. It also nests a number of important and popular models in finance, including the classes of jump-diffusion models and Markovian regimeswitching models. The Esscher transform is employed to determine an equivalent martingale measure. Simulation experim...

Nowadays, the regime switching model has become a popular model in mathematical finance and actuarial science. The market is not complete when the model has regime switching. Thus, pricing the regime switching risk is an important issue. In Naik (1993), a jump diffusion model with two regimes is studied. In this paper, we extend the model of Naik (1993) to a multi-regime case. We present a trin...

Estimators for options prices with different maturities are constructed on the same trajectories of the underlying asset price process. The weighted sum of their variances (the weighted variance) is chosen as a criterion of minimization. Optimal estimators with minimal weighted variance are pointed out in the case of a jump-diffusion model. The efficiency of the constructed estimators is discus...

where is the Poisson process which corresponds to the underlying asset t , t is the jump size of asset price return with log normal distribution and  t means that there is a jump the value of the process before the jump is used on the left-hand side of the formula. Moreover, in 2003, Eraker Johannes and Polson [3] extended Bate’s work by incorporating jumps in volatility and their model is giv...