We propose an affine term structure model which accommodates non-linearities in the drift and volatility function of the short-term interest rate. Such non-linearities are a consequence of discrete beta-distributed regime shifts constructed on multiple thresholds. We derive iterative closed form...

Companies' investments in research and development (R&D) are usually associated with better growth opportunities incorporated in the firms' market valuation. This study focuses on the question how does the firms' market value attributable to R&D investments depend on the firms' ability to employ...

Risk management and asset pricing benefit from simple functional descriptions of the distribution of real asset returns. Recently, several authors have proposed that asset returns in real stock markets are distributed according to a hyperbolic distribution. While asset returns are generated by...

We study in a general perspective the partial equilibrium incentives and the general equilibrium asset pricing implications of Value-at-Risk (VaR) regulation in continuous time economies with intermediate consumption, stochastic opportunity set, and heterogenous attitudes to risk. Our findings...

In this paper we propose analytical approximations for computing implied volatilities when time-to-maturity t is small. The analysis is performed in the framework of a two-factor model with local and stochastic volatility. We describe an algorithm for building the power series approximation of...

Momentum strategies based on continuations in stock prices have become increas-ingly popular among academics, money managers, and investors in recent years. While there is little controversy on the profitability of momentum strategies, their implementation is afflicted with many difficulties....

We present a geometric approach to discrete time multiperiod mean variance portfolio opti-mization that largely simplifies the mathematical analysis and the economic interpretation of such model settings. We show that multiperiod mean variance optimal policies can be decom-posed in an orthogonal...

We aim at accommodating the existing affine jump-diffusion and quadratic models under the same roof, namely the linear-quadratic jump-diffusion (LQJD) class. We give a complete characterization of the dynamics of this class by stating explicitly the structural constraints, as well as the...

This paper investigates the relative influences of industrial and country factors in international stock returns. Until very recently, academic research has consistently found that country factors dominate industrial factors. This result is in contradiction with practitioners beliefs. This paper...

n this study, we examine the level of stock market integration and the impact of sovereign risk on the pricing of European equity markets since the introduction of the euro. We use a multivariate GARCH(1,1)-M return generating model allowing for partial market integration in which sovereign risk...