In this financial engineering research, we study the behaviour of an option premium of a call/put option which is embedded in a typical fixed coupon bond with finite maturity. The contribution of the research is the conclusion about the dynamics of premium changes; represented by direction and...

We propose a general equilibrium model to study the link between the cross section of expected returns and book-to-market characteristics. We model two primitive assets: value assets and growth assets that are options on assets in place. The cost of option exercise, which is endogenously...

In this review we survey the recent research on the fundamental determinants of stock returns. These studies explore how firms' systematic risk and their investment and production decisions are jointly determined in equilibrium. Models with production provide insights into several types of...

The article presents a historical review of the literature related to the empirical problem of excessive risk premium. The risk premium (the difference between the return on equities and risk-free rate) observed in financial markets cannot be reconciled with theoretical models of financial...

This study quantifies the dynamic interrelationship between the KOSPI index return and search query data derived from the Naver DataLab. The empirical estimation using a bivariate GARCH model reveals that negative contemporaneous correlations between the stock return and the search frequency...

I study financial product innovation in a model with two classes of agents: “sophisticated” and “unsophisticated.” Unsophisticated agents are hit with frictions that lower the return to a conventional asset they hold. Sophisticated agents construct financial innovations that are perfect...

During the recent crisis, lags in the transmission mechanism of economic shocks, together with monetary and fiscal policy, made it difficult to assess the evolving dynamics of creditworthiness. As such, developments in financial markets became a key guide for investors and policymakers in...