Bond prices tend to move together. Stocks tend to go their own way. This distinction requires completely different approaches to managing risks for these securities. For equities the emphasis is on reducing idiosyncratic risk through portfolio diversification. For interest rate-sensitive...

Index options have been one of the most successful of the many innovative financial instruments introduced over the last few decades, as their high trading volume indicates. Given their prominence, the pricing efficiency of these markets is of great importance. ; Detecting inefficient pricing,...

Many financial institutions hold derivative securities in their portfolios, and frequently these securities need to be hedged for extended periods of time. Failure to hedge properly can expose an institution to sudden swings in the values of derivatives, such as options, resulting from large,...

Because volatility of the underlying asset price is a critical factor affecting option prices and hedge ratios, the modeling of volatility and its dynamics is of vital interest to traders, investors, and risk managers. This modeling is a difficult task because the path of volatility during the...