construction of reliablesemi-parametric estimates of the risk associated with extreme pricemovements. Our approach is based on semi … the empiricaldistribution function to evaluate the returns on exotic options. …

portfolio risk, and changes diversification arguments when a portfolio is constructed. When R&D projects exhibit option …. Real option theory argues that research projects with conditional phases have option-like risk and return properties, and … are different from unconditional projects. We show that although the risk of a portfolio always depends on the correlation …

-Scholes-Merton framework large portfolios of options can be hedged without risk in discrete time. The nature of the hedge portfolio in the … values of the options in our framework are driven by systematic and idiosyncratic risk factors. Instead of linearly (delta …) hedging the total risk of each option separately, the correct hedge portfolio in discrete time eliminates linear (delta) as …

We study the optimal taxation of risk-free and excess capital income with heterogeneous rates of return, alongside an … optimal nonlinear earnings tax. Households can hold three assets: one risk-free, one risky but diversifiable, and one a … private investment with idiosyncratic risk whose expected return differs among households. Contrary to expectations, the …

Double barrier options have become popular instruments in derivative markets. Several papers_new have already … analyseddouble knock-out call and put options using different methods. In a recent paper, Geman and Yor (1996) deriveexpressions for … analytical valuation formulas for a much wider variety of double barrier options than has beentreated in the literature so far …

Kahneman's (1992) cumulative prospect theory (CPT). We argue that these options are overpriced because investors' overweight … match a set of subjective density functions derived from risk-neutral densities, including the CPT with the empirical … pronounced in options of longer maturity. We also find that time-variation in overweighting of small probabilities is strongly …

panel of stock and options data. We propose a multivariate option pricing model designed to allow for, but not superimpose … capturing jump contagion for risk management, option pricing, and scenario analysis. …