This paper concerns optimal investment problem with proportional transaction costs and finite time horizon based on exponential utility function.Using a partial differential equation approach,we reveal that the problem is equivalent to a parabolic double obstacle problem involving two free boundaries that correspond to the optimal buying and selling policies.Numerical examples are obtained by the binomial method.
By considering the failure of normal distribution and continuous assumption in financial modeling, this paper attempts to apply the Exponential Variance Gamma (EVG) model into the pricing framework of permanent convertible bonds with call clause. Following framework of Gapeev & Ku¨hn(2005), we obtain an explicit solution to the bond price and optimal stopping strategies, which shows that the new pricing framework is quite different from the continuous model and even the Jump Diffusion model. Compared with the numerical calculation, the closed form results price convertible bonds quickly and accurately.
YANG Xiao-fengYU Jin-pingHUANG Wen-liLI Sheng-hong
In this article, we introduce the Google's method for quality ranking of web page in a formal mathematical format, use the power iteration to improve the PageRank, and also discuss the effect of different q to the PageRank, as well as how a PageRank will be changed if more links are added to one page or removed from some pages.
The primary goal of this paper is to price European options in the Merton's framework with underlying assets following jump-difusion using fuzzy set theory.Owing to the vague fluctuation of the real fnancial market,the average jump rate and jump sizes cannot be recorded or collected accurately.So the main idea of this paper is to model the rate as a triangular fuzzy number and jump sizes as fuzzy random variables and use the property of fuzzy set to deduce two diferent jump-difusion models underlying principle of rational expectations equilibrium price.Unlike many conventional models,the European option price will now turn into a fuzzy number.One of the major advantages of this model is that it allows investors to choose a reasonable European option price under an acceptable belief degree.The empirical results will serve as useful feedback information for improvements on the proposed model.
