To obtain the maximum benefits from diversification, financial theory suggests that investors should invest internationally because of the larger potential for risk reduction stemming from the lower correlation exisiting between assets of different countries. The question that we raise in this...

Combinatorial exchanges have existed for a long time in securities markets. In these auctions buyers and sellers can place orders on combinations, or bundles of different securities. These orders are conjunctive: they are matched only if the full bundle is available. On business-to-business...

Constraints on downside risk, measured by shortfall probability, expected shortfall, semi-variance etc., lead to optimal asset allocations which differ from the meanvariance optimum. The resulting optimization problem can become quite complex as it exhibits multiple local extrema and...

This paper investigates computational and implementation issues for the valuation of options on three underlying assets, focusing on the use of the finite difference methods. We demonstrate that implicit methods, which have good convergence and stability prooperties, can now be implemented...

We investigate the influence of various fundamental variables on a cross-section of credit default swap transaction data. Credit default swap rates can be seen as a superior proxy to credit risk than bond spreads are. Because we have transaction prices rather than quotes, we have thus...

Morck, Yeung and Yu (MYY, 2000) show that R2 and other measures of stock market synchronicity are higher in countries with less developed financial systems and poorer corporate governance. MYY and Campbell, Lettau, Malkiel and Xu (2001) also find a secular decline in R2 in the United States over...

Agent based models take into account limited rational behaviour of individuals acting on financial markets. Explicit simulation of this behaviour and the resulting interac-tion of individuals provide a description of aggregate financial market time series. Al-though the outcomes of such...

We aim at accommodating the existing affine jump-diffusion and quadratic models under the same roof, namely the linear-quadratic jump-diffusion (LQJD) class. We give a complete characterization of the dynamics underlying this class of models as well as identification constraints, and compute...

This article proposes an estimation procedure for the affine stochastic volatility models with jumps both in the asset price and variance processes. The estimation procedure is based on the joint (here bi-variate) unconditional characteristic function for the stochastic process for which we...

We introduce Indirect Robust Generalized Method of Moments (IRGMM), a new simulation-based estimation methodology, to model short-term interest rate processes. The primary advantage of IRGMM relative to classical estimators of the continuous-time short-rate diffusion processes is that it...