MoneyScience News |
- Blog Post: OlsenBlog: Trading Forex Is A Positive Sum Game
- Published / Preprint: STATIC FUND SEPARATION OF LONGâTERM INVESTMENTS
- Published / Preprint: CLOSED FORM PRICING FORMULAS FOR DISCRETELY SAMPLED GENERALIZED VARIANCE SWAPS
- Published / Preprint: FROM SMILE ASYMPTOTICS TO MARKET RISK MEASURES
- Published / Preprint: SWAPTION PRICING IN AFFINE AND OTHER MODELS
- Published / Preprint: THE EFFECT OF TRADING FUTURES ON SHORT SALE CONSTRAINTS
- Published / Preprint: GENERAL PROPERTIES OF ISOELASTIC UTILITY ECONOMIES
- Published / Preprint: BLACKâSCHOLES REPRESENTATION FOR ASIAN OPTIONS
- Published / Preprint: DEFAULT AND SYSTEMIC RISK IN EQUILIBRIUM
- Published / Preprint: PORTFOLIOS OF AMERICAN OPTIONS UNDER GENERAL PREFERENCES: RESULTS AND COUNTEREXAMPLES
- Published / Preprint: PRICING DERIVATIVES ON MULTISCALE DIFFUSIONS: AN EIGENFUNCTION EXPANSION APPROACH
- Published / Preprint: TIMEâCHANGED ORNSTEINâUHLENBECK PROCESSES AND THEIR APPLICATIONS IN COMMODITY DERIVATIVE MODELS
- Published / Preprint: AN ONLINE PORTFOLIO SELECTION ALGORITHM WITH REGRET LOGARITHMIC IN PRICE VARIATION
- Published / Preprint: BOUNDARY EVOLUTION EQUATIONS FOR AMERICAN OPTIONS
- Published / Preprint: ADMISSIBILITY OF GENERIC MARKET MODELS OF FORWARD SWAP RATES
- Published / Preprint: GAME CALL OPTIONS REVISITED
- Blog Post: TheFinancialServicesClub: Sayonara Osaka
- Blog Post: Falkenblog: Lakoff Refuted
- Published / Preprint: The full-tails gamma distribution applied to model extreme values. (arXiv:1211.0130v1 [math.ST])
- Published / Preprint: The role of the Model Validation function to manage and mitigate model risk. (arXiv:1211.0225v1 [q-fin.RM])
- Published / Preprint: A probabilistic numerical method for optimal multiple switching problem and application to investments in electricity generation. (arXiv:1210.8175v1 [math.NA] CROSS LISTED)
- Blog Post: iMFdirect: Seeing Our Way Through The Crisis: Why We Need Fiscal Transparency
- The Financial Education Daily is out! http://t.co/TYluKzUv ⸠Top stories today via @KelleySchool @VanderbiltOwen @ucdavismba
| Blog Post: OlsenBlog: Trading Forex Is A Positive Sum Game Posted: 02 Nov 2012 02:06 AM PDT Have you ever played dice with a friend? Betting a fixed amount of money each turn, you win if the number on the top face of the die is one, two or three, your friend wins in all the three other cases. At any single point in time, the sum of all the profits and losses amount up to exactly zero. This is an example of a very simple zero sum game. Read the whole article on FXStreet.comread more... Visit MoneyScience for the Complete Article.      |
| Published / Preprint: STATIC FUND SEPARATION OF LONGâTERM INVESTMENTS Posted: 02 Nov 2012 01:51 AM PDT This paper proves a class of static fund separation theorems, valid for investors with a long horizon and constant relative risk aversion, and with stochastic investment opportunities. An optimal portfolio decomposes as a constant mix of a few preferenceâ€free funds, which are common to all investors. The weight in each fund is a constant that may depend on an investor’s risk aversion, but not... Visit MoneyScience for the Complete Article.    |
| Published / Preprint: CLOSED FORM PRICING FORMULAS FOR DISCRETELY SAMPLED GENERALIZED VARIANCE SWAPS Posted: 02 Nov 2012 01:51 AM PDT Most of the existing pricing models of variance derivative products assume continuous sampling of the realized variance processes, though actual contractual specifications compute the realized variance based on sampling at discrete times. We present a general analytic approach for pricing discretely sampled generalized variance swaps under the stochastic volatility models with simultaneous jumps... Visit MoneyScience for the Complete Article.    |
| Published / Preprint: FROM SMILE ASYMPTOTICS TO MARKET RISK MEASURES Posted: 02 Nov 2012 01:40 AM PDT The left tail of the implied volatility skew, coming from quotes on outâ€ofâ€theâ€money put options, can be thought to reflect the market’s assessment of the risk of a huge drop in stock prices. We analyze how this market information can be integrated into the theoretical framework of convex monetary measures of risk. In particular, we make use of indifference pricing by dynamic convex risk... Visit MoneyScience for the Complete Article.    |
| Published / Preprint: SWAPTION PRICING IN AFFINE AND OTHER MODELS Posted: 02 Nov 2012 01:39 AM PDT This paper shows that Singleton and Umantsev’s method for swaption pricing in affine models can be simplified and extended to other models. Two alternative methods for approximating the option exercise boundary are introduced: one based on the multivariate Taylor series expansion, and the other based on durationâ€matched zeroâ€coupon bond approximation. Applied to affine models and... Visit MoneyScience for the Complete Article.    |
| Published / Preprint: THE EFFECT OF TRADING FUTURES ON SHORT SALE CONSTRAINTS Posted: 02 Nov 2012 01:39 AM PDT It is commonly believed that the trading of futures on a commodity enables the market to overcome short selling constraints on the spot commodity itself. This belief is embedded in the notion that trading strategies involving futures contracts enable traders to replicate the payoffs as if they were short the spot commodity. The purpose of this paper is to investigate this common belief in a... Visit MoneyScience for the Complete Article.    |
| Published / Preprint: GENERAL PROPERTIES OF ISOELASTIC UTILITY ECONOMIES Posted: 02 Nov 2012 01:39 AM PDT This paper studies the class of singleâ€good Arrowâ€"Debreu economies in which all agents have isoelastic utility functions and homogeneous beliefs, but have possibly different cautiousness parameters and endowments. For each economy in this class, the equilibrium stochastic discount factor is an exponential function of the inverse mapping of a completely monotone function, evaluated at the... Visit MoneyScience for the Complete Article.    |
| Published / Preprint: BLACKâSCHOLES REPRESENTATION FOR ASIAN OPTIONS Posted: 02 Nov 2012 01:28 AM PDT Asian options are securities with a payoff that depends on the average of the underlying stock price over a certain time interval. We identify three natural assets that appear in pricing of the Asian options, namely a stock S, a zero coupon bond BT with maturity T, and an abstract asset A (an “average assetâ€) that pays off a weighted average of the stock price number of units of a dollar at... Visit MoneyScience for the Complete Article.    |
| Published / Preprint: DEFAULT AND SYSTEMIC RISK IN EQUILIBRIUM Posted: 02 Nov 2012 01:27 AM PDT We develop a finite horizon continuous time market model, where riskâ€averse investors maximize utility from terminal wealth by dynamically investing in a riskâ€free money market account, a stock, and a defaultable bond, whose prices are determined via equilibrium. We analyze the endogenous interaction arising between the stock and the defaultable bond via the interplay between equilibrium... Visit MoneyScience for the Complete Article.    |
| Posted: 02 Nov 2012 01:27 AM PDT We consider the optimal exercise of a portfolio of American call options in an incomplete market. Options are written on a single underlying asset but may have different characteristics of strikes, maturities, and vesting dates. Our motivation is to model the decision faced by an employee who is granted options periodically on the stock of her company, and who is not permitted to trade this... Visit MoneyScience for the Complete Article.    |
| Posted: 02 Nov 2012 01:27 AM PDT Using tools from spectral analysis, singular and regular perturbation theory, we develop a systematic method for analytically computing the approximate price of a large class derivativeâ€assets. The payoff of the derivativeâ€assets may be pathâ€dependent. In addition, the process underlying the derivatives may exhibit killing (i.e., jump to default) as well as combined local/nonlocal... Visit MoneyScience for the Complete Article.    |
| Posted: 02 Nov 2012 01:27 AM PDT This paper studies subordinate Ornsteinâ€"Uhlenbeck (OU) processes, i.e., OU diffusions time changed by Lévy subordinators. We construct their sample path decomposition, show that they possess meanâ€reverting jumps, study their equivalent measure transformations, and the spectral representation of their transition semigroups in terms of Hermite expansions. As an application, we propose a new... Visit MoneyScience for the Complete Article.    |
| Posted: 02 Nov 2012 01:15 AM PDT We present a novel efficient algorithm for portfolio selection which theoretically attains two desirable properties:read more... Visit MoneyScience for the Complete Article.    |
| Published / Preprint: BOUNDARY EVOLUTION EQUATIONS FOR AMERICAN OPTIONS Posted: 02 Nov 2012 01:07 AM PDT We consider the problem of finding optimal exercise policies for American options, both under constant and stochastic volatility settings. Rather than work with the usual equations that characterize the price exclusively, we derive and use boundary evolution equations that characterize the evolution of the optimal exercise boundary. Using these boundary evolution equations we show how one can... Visit MoneyScience for the Complete Article.    |
| Published / Preprint: ADMISSIBILITY OF GENERIC MARKET MODELS OF FORWARD SWAP RATES Posted: 02 Nov 2012 01:07 AM PDT Our main goal is to reâ€examine and extend certain results from the papers by Galluccio et al. and Pietersz and van Regenmortel. We establish several results providing alternate necessary and sufficient conditions for admissibility of a family of forward swaps, that is, the property that it is supported by a (positive) family of bonds associated with the underlying tenor structure. We also... Visit MoneyScience for the Complete Article.    |
| Published / Preprint: GAME CALL OPTIONS REVISITED Posted: 02 Nov 2012 01:07 AM PDT In this paper, having been inspired by the work of Kunita and Seko, we study the pricing of δâ€penalty game call options on a stock with a dividend payment. For the perpetual case, our result reveals that the optimal stopping region for the option seller depends crucially on the dividend rate d. More precisely, we show that when the penalty δ is small, there are two critical dividends 0 <... Visit MoneyScience for the Complete Article.    |
| Blog Post: TheFinancialServicesClub: Sayonara Osaka Posted: 01 Nov 2012 06:59 PM PDT So there we go, another year, another SIBOS.read more... Visit MoneyScience for the Complete Article.    |
| Blog Post: Falkenblog: Lakoff Refuted Posted: 01 Nov 2012 05:58 PM PDT George Lakoff has a theory that Republicans are master manipulators of emotions by their clever framing of issues. He sometimes says we are able to evaluate ideas on their own, he emphasizes the fact that people unconsciously respond to word associations, and form their beliefs based on these clever marketing strategies (it's a bit like how Samuelson used to say he was in favor of a modest... Visit MoneyScience for the Complete Article.    |
| Posted: 01 Nov 2012 05:34 PM PDT In this article we show the relationship between the Pareto distribution and the gamma distribution. This shows that the second one, appropriately extended, explains some anomalies that arise in the practical use of extreme value theory. The results are useful to certain phenomena that are fitted by the Pareto distribution but, at the same time, they present a deviation from this law for very... Visit MoneyScience for the Complete Article.    |
| Posted: 01 Nov 2012 05:34 PM PDT This paper describes the current taxonomy of model risk, ways for its mitigation and management and the importance of the model validation function in collaboration with other departments to design and implement them. Visit MoneyScience for the Complete Article.    |
| Posted: 01 Nov 2012 05:34 PM PDT In this paper, we present a probabilistic numerical algorithm combining dynamic programming, Monte Carlo simulations and local basis regressions to solve non-stationary optimal multiple switching problems in infinite horizon. We provide the rate of convergence of the method in terms of the time step used to discretize the problem, of the size of the local hypercubes involved in the regressions,... Visit MoneyScience for the Complete Article.    |
| Blog Post: iMFdirect: Seeing Our Way Through The Crisis: Why We Need Fiscal Transparency Posted: 01 Nov 2012 07:43 AM PDT read more... Visit MoneyScience for the Complete Article.    |
| Posted: 06 Oct 2012 12:32 AM PDT BusinessSchools: The Financial Education Daily is out! http://t.co/TYluKzUv â–¸ Top stories today via @KelleySchool @VanderbiltOwen @ucdavismba Visit MoneyScience for the Complete Article.    |
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