• Journal of the Korean Statistical Society
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• 제36권2호
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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.

• Industrial Engineering and Management Systems
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• 제6권1호
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• pp.55-63
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• 2007

Exchange of information is essential to the process of innovation such as product development. However, in many cases innovation fails because of a lack of knowledge sharing among parties concerned, even if parties individually have pieces of useful knowledge and skills. Besides physical factors like communication costs, the possibility of opportunistic behavior by parties like stealing ideas can discourage information exchange. This paper introduces a model to analyze incentives of information exchange. The model is a game by two players who alternately opt to offer information to the partner. It is suggested that information exchange can stop before reaching the efficient level. In order to attain the efficient information exchange, expectation of mutual benefit and absence of opportunistic motives in both players are needed. Methods for promoting information exchange include modifying payoff structure to meet the condition of information exchange. The fluidity of partnership may increase a variety of information exchange partners, but discourage building trust between partners which promotes information exchange.

• 대한전기학회논문지:전력기술부문A
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• 제52권10호
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• pp.616-623
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• 2003

Competition among electric generation companies is a major goal of restructuring in the electricity industry, The trading system in an electricity market has been one of the most important issues in deregulated electricity market. This paper deals with comparisons of the major two types of the trading system: compulsory pool market and bilateral contract market. The two trading systems are compared quantitatively from the viewpoint of consumer's surplus and social welfare, This paper, also, proposes a unified model of Cournot and Bertrand for analyzing the mixed trading system of pool market and bilateral contract market. Nash equilibrium of the unified model is derived by criteria for participating in bilateral contract market. Numerical results from a sample case show that a mixed trading system of pool market and price-competitive bilateral market is beneficial to consumer from the view points of consumer's surplus.

• Communications for Statistical Applications and Methods
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• 제14권2호
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• pp.413-429
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• 2007

Equity-linked securities (ELS) provide their customers with the return linked to the underlying equity (or equities). Equity-linked products in Korea have recently gained popularity due to relatively low interest rates. This paper discusses an equity-linked security whose principal is not guaranteed. The payoff of the ELS depends on the returns of two underlying assets. This paper presents numerical prices of the proposed product by using Monte-Carlo simulation method. It assumes that the log-returns of two stocks follow either Brownian motion or variance gamma process. Finally, the comparison of the two approaches is discussed.

• 대한수학회보
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• 제51권4호
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• pp.1087-1100
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• 2014

We present an accurate and efficient numerical method for solving the Black-Scholes equation. The method uses an adaptive grid technique which is based on a far-field boundary position and the Peclet condition. We present the algorithm for the automatic adaptive grid generation: First, we determine a priori suitable far-field boundary location using the mathematical model parameters. Second, generate the uniform fine grid around the non-smooth point of the payoff and a non-uniform grid in the remaining regions. Numerical tests are presented to demonstrate the accuracy and efficiency of the proposed method. The results show that the computational time is reduced substantially with the accuracy being maintained.

• KIEE International Transactions on Power Engineering
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• 제5A권4호
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• pp.311-321
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• 2005

A competitive generating company (GENCO) could maximize its payoff by optimizing its generation assets. This paper considers the GENCO's arbitrage problem using price-based unit commitment (PBUC). The GENCO could consider arbitrage opportunities in purchases from qualifying facilities (QFs) as well as simultaneous trades with spots markets for energy, ancillary services, emission, and fuel. Given forecasted hourly market prices for each market, the GENCO's generating asset arbitrage problem is formulated as a mixed integer program (MIP) and solved by a branch-and-cut algorithm. A GENCO with 54 thermal and 12 combined-cycle units is considered for analyzing the proposed formulation. The proposed case studies illustrate the significance of simultaneous arbitrage by applying PBUC to multi-commodity markets.

• Communications for Statistical Applications and Methods
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• 제11권2호
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• pp.213-225
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• 2004

A fixed-strike lookback option is an option whose payoff is determined by the maximum (or minimum) price of the underlying asset within the option's life. Under the Black-Scholes framework, the time-t price of an equity asset follows a geometric Brownian motion. Applying the method of Esscher transforms, this paper will derive explicit pricing formulas for fixed-strike lookback call and put options, respectively. In addition, this paper will show a relationship (duality property) between the pricing formulas of the call and put options. Finally, this paper will derive explicit pricing formulas for the fixed-strike lookback options when their underlying asset pays dividends continuously at a rate proportional to its price.

• 대한전기학회:학술대회논문집
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• 대한전기학회 2004년도 하계학술대회 논문집 A
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• pp.710-712
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• 2004

Generation companies(Genco) submit the supply functions as a bidding function to a bid market in a competitive electricity market. The profits of Gencos vary in accordance with the bid functions, so the selection of a bidding function plays a key role in increasing their profits. This paper presents an analysis of the selection of the supply function from the viewpoint of Nash equilibrium(NE). Four types of bidding function parameters are used for analizing the electricity market. The competition of selecting bidding parameters is modeled as subgame and overall game in this research. The NEs in both game are computed by using analytic method and payoff matrix method. It is verified in case studies for the NE of overall game to satisfy the equilibrium condition.

• 대한전기학회논문지:전력기술부문A
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• 제51권4호
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• pp.202-208
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• 2002

In a dynamic game where the players move in a periodical sequence, each player observes the strategy of the others. So the players who move later in a game get to know the moves of others having made before them. Those who move earlier must take this into account in devising their optimal strategy. In the Poolco model, the bidding game is executed periodically. The player participating in the bidding game accumulates the information of its own and others'strategies, and payoffs through the repeated bidding process. Thereby, the players in this game would be able to map out how get the maximum profit, and get closer to the optimal strategy. This paper presents a mathematical modeling for a player to determine his or her optimal strategy at period T, based on the information acquired from the previous rounds for the periods, T-1, T-2, and so on. The proposed modeling is demonstrated with a dynamic fame theory.

• 한국정밀공학회:학술대회논문집
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• 한국정밀공학회 2003년도 춘계학술대회 논문집
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• pp.802-805
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• 2003

Structural surface becomes an antenna. The integration of antennas into structural body panels is a new high payoff technology. It emerged from the need to improve structural efficiency and antenna performance. In this paper, we developed new design concept for the structural surface which transmits and receives the electromagnetic signals, and it is termed Surface-Antenna-Structure (SAS). Design procedure was presented including structure design. material selection and design of antenna elements, which was processed according to the communication with KORSAT satellite at Ku-Band (12.25-12.75 GHz). The final demonstration article was 350$\times$200$\times$7.5mm flat antenna panel. Experimental results for antenna performances were in good agreements with design requirements. Also structural analysis was performed with SAS. estimating stress distributions under simply supported condition with Laminated Plate Theories and Wavier Solutions. The SAS concept can be extended to give a useful guide to manufacturers of structural body panels as well as antenna designers. promising innovative future communication technology.