This paper focuses on the estimation of mutual fund styles by return-based style analysis. Usually, the investment style is assumed to be either constant through time, or time variation is implicitly accounted for by using rolling regressions. The former assumption is often contradicted by data...

A popular argument states that most of the diversification in a portfolio can be obtained with a rather small number of securities. In this paper we present three algorithms to approach the underlying NP-hard problem of portfolio optimization with a cardinality constraint. All three of these...

In this paper we explore ways that alleviate problems of nonparametric (artificial neural networks) and parametric option pricing models by combining the two. The resulting enhanced network model is compared to standard artificial neural networks and to parametric models with several historical...

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...

Theoretical research on option valuation tends to focus on pricing the plain-vanilla European-style derivatives. Duffie, Pan, and Singleton (Econometrica, 2000) have recently developed a general transform method to determine the value of European options for a broad class of the underlying price...

Margrabe provides a pricing formula for an exchange option where the distributions of both stock prices are log-normal with correlated components. Merton has provided a formula for the price of a European call option on a single stock where the stock price process contains a compound Poisson...

This article proposes and tests a convenient, easy to use closed-form solution for the pricing of a European Call option where the underlying asset is subject to upward and downward jumps displaying separate distributions and probabilities of occurrence. The setup presented in this article lays...