This article provides a generalized two-firm model of default correlation, based on the structural approach that incorporates interest rate risk. In most structural models default is driven by the firms' asset dynamics. In this article, a two-firm model of default is instead driven by the...

This paper studies the dynamics of the traditional cobweb model with risk averse heterogeneous producers who seek to learn the distribution of asset prices using a geometric decay processes (GDP) - the expected mean and variance are estimated as a geometric weighted average of past observations...

We develop a simple behavioural asset pricing model with fundamentalists and chartists to study price behaviour in financial markets. Within our model, the market impact of the weighting process of the conditional mean and variance of the chartists and investors' reactions are analysed. Price...

Stability and bifurcation analysis of deterministic systems has been widely used in modeling financial markets. However, the impact of such dynamic phenomena on various statistical properties of the corresponding stochastic model, including skewness and excess kurtosis, various autocorrelation...

In this paper we consider the pricing of an American call option whose underlying asset dynamics evolve under the influence of two independent stochastic volatility processes of the Heston (1993) type. We derive the associated partial differential equation (PDE) of the option price using hedging...

This paper proposes an auxiliary particle filter algorithm for inference in regime switching stochastic volatility models in which the regime state is governed by a first-order Markov chain. We proposes an ongoing updated Dirichlet distribution to estimate the transition probabilities of the...

This paperc onsiders the problem o fnumerically evaluating barrier option prices when the dynamics of the underlying are driven by stochastic volatility following the square root process of Heston (1993). We develop a method of lines approach to evaluate the price as well as the delta and gamma...

This paper considers the problem of pricing American options when the dynamics of the underlying are driven by both stochastic volatility following a square root process as used by Heston (1993), and by a Poisson jump process as introduced by Merton (1976). Probability arguments are invoked to...

This paper presents a generalisation of McKean's free boundary value problem for American options by considering an American strangle position, where the early exercise of one side of the payoff will knock-out the out-of-the-money side. When attempting to evaluate the price of this American...

This paper considers a discrete-time model of a financial market with one risky asset and one risk-free asset, where the asset price and wealth dynamics are determined by the interaction of two groups of agents, fundamentalits and chartists. In each period each group allocates its wealth between...