We develop a quantitative model to select hedge funds in the long-short equity sector. The selection strategy is verified on a survivorship-bias-free hedge fund database, from January 1990 to September 2002. We focus on the hedge funds acting exclusively in the U.S. market. We identify...

In the standard real options approach to investment under uncertainty, agents formulate optimal policies under the assumptions of risk neutrality or perfect capital markets. However in most situations, corporate executives face incomplete markets either because they receive compensation packages...

We present a model in which a sovereign country optimally decides on its consumption and investment policies as well as on the optimal time to default. In the paper we allow the sovereign borrower to keep the fraction of its augmented wealth in so-called international reserves. We further assume...

This paper uses a simple model of mean-variance asset pricing with transaction costs to analyze one of the main empirical phenomena in stock market competition in the last years, the decrease of transaction costs. We endogenize transaction costs as variables strategically influenced by stock...

This paper presents a simple approach to the pricing of options on spread and some arguments in favor of modelling the spread using its two components instead of the spread itself. We show that, even in a simple Gaussian setting, the spread should not be modelled directly, and that convergence...

We examine the effect of regularly scheduled macroeconomic announcements on the beliefs and preferences of participants in the U.S. Treasury market by comparing the option-implied state-price density (SPD) of bond prices shortly before and after the announcements. We find that the announcements...

This paper introduces a general framework for market models, named Market Model Approach, through the concept of admissible sets of for-ward swap rates spanning a given tenor structure. We relate this concept to results in graph theory by showing that a set is admissible if and only if the...

This paper provides a simple model of the rescheduling of debt following a sovereign default as a bond exchange. In case of default, the sovereign offers a new bond with lower coupon and principal.The debtors accept the offer if the value of the new bonds is higher than the proceedings of the...

The financial innovations of the late 1990s have led to the emergence of a significant number of new instruments, in particular in the market for hedging credit risk. This paper, based on an original dataset of transactions and quotes, looks at credit default swaps drawn on sovereign countries....