We analyse all Mini Flash Crashes (or Flash Equity Failures) in the US equity markets in the four most volatile months during 2006-2011. In contrast to previous studies, we find that Mini Flash Crashes are the result of regulation framework and market fragmentation, in particular due to the...

In this paper we analyze the source and magnitude of marketing gains from selling structured debt securities at yields that reflect only their credit ratings, or specifically at yields on equivalently rated corporate bonds. We distinguish between credit ratings that are based on probabilities of...

This paper compares the pricing and hedging performance of the LMM model against two spot-rate models, namely Hull-White and Black-Karasinski, and the more recent Swap Market Model from an Asset-Liability-Management (ALM) perspective. In contrast to previous studies in the literature, our...

In this paper, we compare two one-factor short rate models: the Hull White model and the Black-Karasinski model. Despite their inherent shortcomings the short rate models are being used quite extensively by the practitioners for risk-management purposes. The research, as part of students'...

This paper tests the co-terminal swap market model (SMM) pricing and hedging performance on Bermudan swaptions. To our knowledge, the drift for SMM is derived explicitly for the first time here, and the procedures for calibration and simulation using a collection of forward swap rates are also...

The purpose of this paper is to apply a belief rule-based (BRB) system to solve the multiasset class portfolio optimisation problems. The BRB system, was developed on the basis of the concept of belief structures and the evidential reasoning (ER) approach, is a generic non-linear modelling and...

We present an application of importance sampling in a Monte Carlo simulation for multi-asset options and in a Multi-Level Monte Carlo simulation. We demonstrate that applying importance sampling only on the first level of the Multi-Level Monte Carlo significantly improves its effective...

This paper provides a strategy for portfolio risk management by inferring extreme movements in financial markets. The core of the provided strategy is a statistical model for the joint tail distribution that attempts to capture accurately the data generating process through an extremal modelling...

Using the joint characteristic function of equity price and state variables, we can price contingent claims on both equity and VIX consistently. Based on linear approximation of jump size, we show that one factor models implies all VIX future contract of different maturities are perfectly...

We introduce a stochastic volatility model with self-exciting jump intensity to capture the change in pricing dynamic triggered by big negative stock returns. The stochastic variance and jump intensity, and their risk premium are estimated jointly from daily stock returns and option data over...