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Title: Two Essays in Financial Product Pricing
Keywords: GMWB, Singular stochastic control, Penalty Method, HJM model, Non-Maturity Liabilities, Exact simulation
Issue Date: 23-Aug-2013
Citation: ZONG JIANPING (2013-08-23). Two Essays in Financial Product Pricing. ScholarBank@NUS Repository.
Abstract: In this thesis, we considered pricing two interest financial products: guaranteed minimum withdrawal benefit (GMWB) and non-maturity liabilities (or deposit). In the first chapter we develop a singular stochastic control model for pricing GMWB. We explore the optimal withdrawal strategy adopted by the rational policyholder that maximizes the expected discounted value of the cash flows generated from holding this variable annuity policy. An efficient finite difference algorithm using the penalty approximation approach is proposed for solving the singular stochastic control model. In the second chapter we develop HJM model for non-maturing deposit valuation. we introduce two special two-factor gaussian HJM model: LGM2++ model and HJM2++ model. Exact simulation scheme in both risk-neutral and forward measure is developed for pricing purpose. Then we introduce two deposit volume and deposit rate model for non-maturity deposits. We develop exact simulation scheme using LGM2++ as market rate model.
Appears in Collections:Master's Theses (Open)

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