Accumulator or "I-kill-you-later": analytical pricing and sensitivity tests of occupation time derivatives.

Cheng, Ping.Thesis (M.Phil.)--Chinese University of Hong Kong, 2010.Includes bibliographical references (p. 91-96).Abstracts in English and Chinese.Chapter 1 --- Introduction --- p.1Chapter 1.1 --- Background --- p.1Chapter 1.1.1 --- Accumulator in a Nutshell --- p.1Chapter 1.1.2 --- Criticism over Accumulators --- p.3Chapter 1.1.3 --- Significance of Research over Accumulators --- p.4Chapter 1.1.4 --- Contribution of this Research --- p.5Chapter 1.2 --- Literature Review --- p.6Chapter 1.2.1 --- Literature on Option Pricing Theory --- p.6Chapter 1.2.2 --- Literature on Occupation Time Derivatives and Accumulators --- p.9Chapter 1.2.3 --- Accumulators as Occupation Time Deriva- tives --- p.14Chapter 1.3 --- Structure of this Thesis --- p.16Chapter 2 --- Theoretical Foundation --- p.17Chapter 2.1 --- Black Scholes Framework --- p.18Chapter 2.1.1 --- The Model --- p.18Chapter 2.1.2 --- Girsanov's Theorem --- p.20Chapter 2.1.3 --- Simulation --- p.21Chapter 2.2 --- Heston Framework --- p.22Chapter 2.2.1 --- Motivation to Extend to Heston Model --- p.22Chapter 2.2.2 --- The Model --- p.23Chapter 2.2.3 --- The Monte Carlo Method --- p.25Chapter 3 --- Pricing under Black-Scholes Framework --- p.30Chapter 3.1 --- Structure One (Suspension Feature) --- p.30Chapter 3.1.1 --- Introduction --- p.30Chapter 3.1.2 --- Model --- p.32Chapter 3.1.3 --- Sensitivity Tests --- p.35Chapter 3.1.4 --- Simulation Results --- p.38Chapter 3.2 --- Structure Two (Knock-out Feature) --- p.40Chapter 3.2.1 --- Introduction --- p.40Chapter 3.2.2 --- Model --- p.41Chapter 3.2.3 --- Sensitivity Tests --- p.45Chapter 3.2.4 --- Simulation Results --- p.48Chapter 3.3 --- Structure Three (Knock-out & Double Commit- ment Feature) --- p.50Chapter 3.3.1 --- Introduction --- p.50Chapter 3.3.2 --- Model --- p.51Chapter 3.3.3 --- Sensitivity Tests --- p.56Chapter 3.3.4 --- Simulation Results --- p.58Chapter 4 --- Extension: Pricing under Heston Framework --- p.59Chapter 4.1 --- Structure One --- p.59Chapter 4.1.1 --- Pricing of the Contract --- p.59Chapter 4.2 --- Structure Two and Three --- p.61Chapter 4.2.1 --- Simulation Results --- p.62Chapter 4.3 --- Heston Parameters Estimates --- p.63Chapter 5 --- Discussion --- p.66Chapter 5.1 --- Volatility of Accumulators --- p.66Chapter 5.2 --- Instability in the Model Parameters --- p.69Chapter 5.3 --- Premium over Accumulators --- p.71Chapter 5.4 --- Return of the Accumulator Products --- p.72Chapter 6 --- Future Work & Conclusion --- p.75Chapter 6.1 --- Future Work --- p.75Chapter 6.2 --- Conclusion --- p.76Chapter A --- Other Parameters Estimation --- p.77Chapter B --- Sample Contracts --- p.80Chapter B.1 --- Equity Accumulator --- p.80Chapter B.2 --- Commodity Accumulator --- p.80Chapter B.3 --- FX-Linked Accumulation --- p.80Bibliography --- p.9