  Models to price long term loans in the securities lending business are
developed. These longer horizon deals can be viewed as contracts with
optionality embedded in them. This insight leads to the usage of established
methods from derivatives theory to price such contracts. Numerical simulations
are used to demonstrate the practical applicability of these models. The
techniques advanced here can lead to greater synergies between the management
of derivative and delta-one trading desks, perhaps even being able to combine
certain aspects of the day to day operations of these seemingly disparate
entities. These models are part of one of the least explored, yet profit laden,
areas of modern investment management.
  A heuristic is developed to mitigate any loss of information, which might set
in when parameters are estimated first and then the valuations are performed,
by directly calculating valuations using the historical time series. This
approach to valuations can lead to reduced models errors, robust estimation
systems, greater financial stability and economic strength. An illustration is
provided regarding how the methodologies developed here could be useful for
inventory management, emissions trading and insurance risk mitigation. All
these techniques could have applications for dealing with other financial
instruments, non-financial commodities and many forms of uncertainty.
