• Communications of the Korean Mathematical Society
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• v.12 no.3
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• pp.725-741
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• 1997

This paper considers the problem of deriving exponential probability inequalities for product symmetric Poisson processes. As an application they are used to show the existence of regular version of some product process derived from L$\acute{e}$vy process.

• Journal of the Korean Statistical Society
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• v.36 no.2
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• pp.237-256
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• 2007

This paper studies the problem of option pricing in an incomplete market. The market incompleteness comes from the discontinuity of the underlying asset price process which is, in particular, assumed to be a compound Poisson process. To find a reasonable price for a European contingent claim, we first find the unique minimal martingale measure and get a price by taking an expectation of the payoff under this measure. To get a closed-form price, we use an asymptotic expansion. In case where the minimal martingale measure is a signed measure, we use a sequence of martingale measures (probability measures) that converges to the equivalent martingale measure in the limit to compute the price. Again, we get a closed form of asymptotic option price. It is the Black-Scholes price and a correction term, when the distribution of the return process has nonzero skewness up to the first order.

• Journal of the Korean Statistical Society
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• v.35 no.2
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• pp.115-142
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• 2006

This paper studies the problem of option hedging when the underlying asset price process is a compound Poisson process. By adopting an asymptotic approach to let the security price converge to a continuous process, we find a closed-form hedging strategy that improves the classical Black-Scholes hedging strategy in a quadratic sense. We first show that the scaled Black-scholes hedging error has a limit in law, and that limit is decomposed into a part that can be traded away and a part that is purely unreplicable. The Black-Scholes hedging strategy is then modified by adding the replicable part of its hedging error and by adding the mean-variance hedging strategy to the nonreplicable part. Some results of simulation experiment s are also provided.

• Journal of the Korean Statistical Society
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• v.28 no.2
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• pp.235-251
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• 1999

In this paper we examine extremal behavior of a $textsc{k}$th-order stationary Markov chain {X\ulcorner} by considering excesses over a high level which typically appear in clusters. Excesses over a high level within a cluster define a cluster damage, i.e., a normalized sum of all excesses within a cluster, and all excesses define a damage point process. Under some distributional assumptions for {X\ulcorner}, we prove convergence in distribution of the cluster damage and obtain a representation for the limiting cluster damage distribution which is well suited for simulation. We also derive formulas for the mean and the variance of the limiting cluster damage distribution. These results guarantee a compound Poisson limit for the damage point process, provided that it is strongly mixing.

• The Korean Journal of Applied Statistics
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• v.24 no.4
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• pp.575-586
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• 2011

In this paper, we study an asymptotic behavior of the finite-time ruin probability of the compound Poisson model in the case that the initial surplus is large. To compare an exact ruin probability with an approximate one, we place the focus on the exact calculation for the ruin probability when the claim size distribution is regularly varying tailed (i.e. exponential claims and inverse Gaussian claims). We estimate an adjustment coefficient in these examples and show the relationship between the adjustment coefficient and the safety premium. The illustration study shows that as the safety premium increases so does the adjustment coefficient. Larger safety premium means lower "long-term risk", which only stands to reason since higher safety premium means a faster rate of safety premium income to offset claims.

• Journal of Korean Society of Coastal and Ocean Engineers
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• v.27 no.4
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• pp.246-257
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• 2015

The progressive degradation paths of structures have quantitatively been tracked by using stochastic processes, such as Wiener process, gamma process and compound Poisson process, in order to consider both the sampling uncertainty due to the usual lack of damage data and the temporal uncertainty associated with the deterioration evolution. Several important features of stochastic processes which should carefully be considered in application of the stochastic processes to practical problems have been figured out through assessing cumulative damage and lifetime distribution as a function of time. Especially, the Wiener process and the gamma process have straightforwardly been applied to armors of rubble-mound breakwaters by the aid of a sample path method based on Melby's formula which can estimate cumulative damage levels of armors over time. The sample path method have been developed to calibrate the related-parameters required in the stochastic modelling of armors of rubble-mound breakwaters. From the analyses, it is found that cumulative damage levels of armors have surely been saturated with time. Also, the exponent of power law in time, that plays a significant role in predicting the cumulative damage levels over time, can easily be determined, which makes the stochastic models possible to track the cumulative damage levels of armors of rubble-mound breakwaters over time. Finally, failure probabilities with respect to various critical limits have been analyzed throughout its anticipated service life.