In this paper we demonstrate the need for a negative market price of volatility risk to recover the difference between Black-Scholes (1973)/Black (1976) implied volatility and realized term volatility. Initially, using quasi-Monte Carlo simulation, we demonstrate numerically that a negative...

Non-financial companies typically face a multitude of risks potentially leading to significant fluctuations in the firm's cash-flows. This paper presents a case study approach demonstrating the hedging strategy employed by an international air carrier managing its jet-fuel price exposure. We...

The issuance of debt instruments with indexation of coupon payments to consumer or commodity prices has occurred with increasing frequency in both the developed and developing world. Such issuance has frequently been made by sovereign or near-sovereign issuers, and occasionally replicated...

Numerous participants in the energy industry require the computation of coefficients of correlation in a large-industry portfolio. Addressing the specifics of the crude-oil futures contracts, this paper proposes and implements a simple intuitive procedure that reduces the cross-maturity...

This paper presents a parsimonious, implementable model for the estimation of the short- and long-term expected rates of return on the Samp;P 500 stock market Index. The model estimates a parametric form for the Market Price of Risk, the Sharpe Ratio, of the Samp;P 500 Index. In addition to...