With increasing appreciation of the fact that stock return variance is stochastic and variance risk is heavily priced, the industry has created a series of variance derivative products to span variance risk. The variance swap contract is the most actively traded of these products. It pays at...

The challenge of international term structure models is to simultaneously account for the properties of interest rate term structures and foreign exchange rates within an arbitrage-free framework. We extend the quadratic term structure models proposed in Leippold and Wu (2002) to multiple...

We develop intuitive expressions for the spread between a forwardcontract and a similar futures contract taking into account the pos-sibility of counterparty default. We evaluate these expressions nu-merically and show that the forward-futures spread is significant forrealistic parameter...

Most derivative contracts are traded over-the-counter, i.e., bilaterally between two counterparties. Recently, clearing services have become available that allow to transfer over-the-counter derivatives to a central counterparty (clearing house). We develop a framework to determine the effects...

We consider American versions of multiple asset options when the underlying assets follow jump-diffusion processes, for example exchange options and max-options. We consider various representations of the option value and in particular apply Fourier transform techniques to the integro-partial...

When one constructs long-term investment plan, one needs to consider the fact that long-term bonds are still exposed to inflation risk. This paper studies the intertemporal portfolio-consumption decision where the investment opportunities include "inflation-indexed bonds" -- a modern financial...