Although quasi-analytic formulas can be derived for European-style financial claims in Heston's stochastic volatility model, the inverse Fourier integration involved makes the calculation somewhat complicated. This challenge has puzzled practitioners for many years because most implementations...

This paper investigates whether the foreign exchange risk is priced in the Pacific Basin equity markets. The test was performed in the conditional version which allows the world prices of market risk and exchange risk to vary over time. Being parsimonious, a principal component analysis is taken...

A general one-factor model for short-term interest rates is proposed. Besides the long memory fractionally integrated mean process, the model also consists of a power function of the interest rate as well as the GARCH effect in the conditional variance. The estimation results show that, while...

This article studies how the loss averse behaviour affects the term structure of real interest rates. Since the pro-cyclical conditional expected marginal rate of substitution, implied from the US consumption data, is consistent with the proposition of loss aversion, we incorporate the loss...

The dual role of houses as durable consumption goods and as financial investments makes the option approach a suitable method for evaluating them. When the buyer of an owner-occupied home spends a large amount of money on a house, he pays the bill to cover not only construction costs but also...