The Korean Journal of Applied Statistics (응용통계연구)

The Korean Statistical Society (한국통계학회)
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On Pricing Equity-Linked Investment Products with a Threshold Expense Structure

  • Received : 20100400
  • Accepted : 20100400
  • Published : 2010.08.31
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Abstract

This paper considers a certain expense structure where a vendor of equity-linked investment product will collect its expenses continuously from the investor's account whenever the investment performance exceeds a certain threshold level. Under the Black-Scholes framework, we derive compact convolution formulas for evaluating the total expenses to be collected during the investment period by using the joint Laplace transform of the Brownian motion and its excursion time. We provide numerical examples for illustration.

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  2. Pricing maturity guarantee under a refracted Brownian motion vol.34, pp.3, 2013, https://doi.org/10.1134/S1995080213030025