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First passage problems of refracted jump diffusion processes and their applications in valuing equity-linked death benefits.
- Source :
- Journal of Industrial & Management Optimization; May2022, Vol. 18 Issue 3, p1689-1707, 19p
- Publication Year :
- 2022
-
Abstract
- This paper studies some first passage time problems in a refracted jump diffusion process with hyper-exponential jumps. Closed-form expressions for four functions associated with the first passage time are obtained by solving some ordinary integro-differential equations. In addition, the obtained results are used to value equity-linked death benefit products with state-dependent fees. Specifically, we obtain the closed-form Laplace transform of the fair value of barrier option, which is further recovered by the bilateral Abate-Whitt algorithm. Numerical results confirm that the proposed approach is efficient. [ABSTRACT FROM AUTHOR]
- Subjects :
- SURVIVORS' benefits
JUMP processes
INTEGRO-differential equations
FAIR value
Subjects
Details
- Language :
- English
- ISSN :
- 15475816
- Volume :
- 18
- Issue :
- 3
- Database :
- Complementary Index
- Journal :
- Journal of Industrial & Management Optimization
- Publication Type :
- Academic Journal
- Accession number :
- 157371022
- Full Text :
- https://doi.org/10.3934/jimo.2021039