I develop a Markov model of samrt money chasing past winning funds while taking into account associated costs. The model also allows market capital entry and exit. The steady-state capital allocations re derived using constant transition probabilities. The results sugget that down side risk is...

Se estudia asignaciones óptimas de clases de activo (Asset Allocation) para afiliados representativos a las AFP con diferentes plazos para jubilar. Se supone que el afiliado desearía maximizar su pensión esperada al momento de jubilar, dado un nivel de riesgo. Entonces, la pregunta es qué...

Surveys of Australian superannuation funds verify that most international bond holdings, but not equity holdings, are hedged for currency risk. We compare the mean-variance efficiency of this practice with two alternative strategies: a conventional forward hedge; and a selective hedge triggered...

The fact that the expected payoffs on assets and call options are infinite under most log-stable distributions led Paul Samuelson and Robert Merton to conjecture that assets and derivatives could not be reasonably priced under these distributions, despite their many other attractive features....

We provide an analytical and flexible framework to evaluate incentive options. Our model not only considers vesting periods and trading and hedging restrictions on the holders, but also specifically includes provisions of reloading and resetting to capture the fact that firms tend to grant more...

The paper applies methods of functional data analysis – functional auto-regression, principal components and canonical correlations – to the study of the dynamics of interest rate curve. In addition, it introduces a novel statistical tool based on the singular value decomposition...

Several studies incorporating estimated volatilities into option pricing formulas have appeared in the literature. However, the models described in these studies tend to perform quite poorly in out-of-sample tests. In particular, significant departures from the observed prices can be seen for...

Portfolio managers use index futures for a variety of reasons. Regardless of their motivation, they will keep a close eye on the relation between the futures and their stock portfolio returns. Whenever this relation is perceived to have changed, the manager will decide whether it is worthwhile...

We consider the behavior of the price of a continuously stored commodity, for which discounted price is a non-constant martingale, and thus not-predictable. We prove that the discounted price realization is within any given neighborhood of zero, with any given probability less than 1, beyond a...

This article analyzes the specifications of option pricing models based on time-changed Levy processes. We classify option pricing models based on (i) the structure of the jump component in the underlying return process, (ii) the source of stochastic volatility, and (iii) the specification of...