We investigate the theoretical and empirical difference between thestandard convexity adjustment and Forward Libor Model in a particular case oftwo-period Constant Maturity Swaps. Using daily data from 1991 to 1997, wesimulate the difference (spread) between the two-period CMS swap rates...

Credit Default Swaps (CDS) are in the process of becoming, liquid and extremelyinformative instruments of default risk. Yet, default swap market has severalnovel aspects that have not received much attention. In this paper we studyan aspect of CDS´s that relates to the prediction of financial...

Prospect theory has found an increasing attention in many fields of economics. However, it has scarcely been addressed in a macroeconomic growth model. In an earlier paper we introduced prospect theory into a stochastic growth model. This paper focuses on linking the Euler equation induced by...