Dynamic term structure models (DTSMs) price interest rate derivatives based on the model­ implied fair values of the yield curve, ignoring any pricing residuals on the yield curve that are either from model approximations or market imperfections. In contrast, option pricing in practice often...

This paper presented a new technique for the simulation of the Greeks (i.e. price sensitivities to parameters), efficient for strongly discontinuous payo¤ options. The use of Malliavin calculus, by means of an integration by parts, enables to shift the differentiation operator from the payo¤...

This paper investigates the performance of international affine term structure models (ATSMs) that are driven by a mutual set of global state variables. We discuss which mixture of Gaussian and square root processes is best suited for modelling international bond markets. We derive necessary...

With abounding evidence of non-linearity in stock markets of developed markets, this study attempts to narrow the gap in the literature of Asian countries by providing further empirical evidence to the issue “are non-linear dynamics a universal occurrence?”. The results from the Hinich...

This paper presents a simple discrete time model for valuing real options. A short proof of optimal exercise rules for the standard problems in the real options theory is given in the binomial and trinomial models, and more generally, when the underlying uncertainty is modelled as a random walk...

This paper presents a descriptive analysis of the primary and secondary market for Finnish treasury bonds. The paper focuses on three issues. First, we report basic descriptive statistics such as auction volumes and secondary market yields and volumes. Second, we estimate the revenues earned by...

Our methodology of 'complete identification,' using simple algebraic geometry, throws new light on the continued commitment of Galton's Error in finance and the resulting misinformation of investors. Mutual funds conventionally advertise their relative systematic market risk, or 'betas,' to...

With abounding evidence of non-linearity in financial markets of developed countries, this study attempts to narrow the gap in the literature of ASEAN countries, with a focus on the foreign exchange and stock markets. The outcomes of our econometric investigation using the Hinich bispectrum test...

We identify and characterize a class of term structure models where bond yields are quadratic functions of the state vector. We label this class the quadratic class and aim to lay a solid theoretical foundation for its future empirical application. We consider asset pricing in general and...

The business media play an active role in influencing stock prices. Statistically significant excess returns at the time of the publication of stock recommendations have been documented many times. Frequently these abnormal gains begin to accumulate long before the publication date. In most...