In this paper we examine the problem of finding investors' reservation option prices and corresponding early exercise policies of American- style options in the market with proportional transaction costs using the utility based approach proposed by Davis and Zariphopoulou (1995). We present a...

Singer and Karnosky's (1995) exact and complete return attribution framework does not account for risk, since it ignores accumulated historical information. Its implied investment strategy selection is based on simple return maximization and ignores that investment strategies are correlated via...

In this paper we develop an improvement on one of the more popular methods for Value-at-Risk measurement, the historical simulation approach. The procedure we employ is the following: First, the density of the return on a portfolio is estimated using a non-parametric method, called a Gaussian...

In this paper, we survey a wide range of theoretical and empirical papers on derivatives markets to address the information contents of trading activities in derivatives markets. Both theoretical and empirical research on options market and futures market indicate that the presence of...

In this paper we extend the utility based option pricing and hedging approach, pioneered by Hodges and Neuberger (1989) and further developed by Davis, Panas and Zariphopoulou (1993), for the market where each transaction has a fixed cost component. We present a model, where investors have a...

In the context of arbitrage-free modelling of financial derivatives, we introduce a novel calibration technique for models in the affine- quadratic class for the purpose of contingent claims pricing and risk- management. In particular, we aim at calibrating a stochastic volatility jump diffusion...

Leveraging the explicit formula for European swaptions and coupon-bond options in HJM one-factor model, we develop a semi-explicit formula for 2-Bermudan options (also called Canary options). We first extend the European swaption formula to future times. We are able to reduce the valuation of a...

This paper tests empirically the performance of three structural models of corporate bond pricing, namely Merton (1974), Leland (1994) and Fan and Sundaresan (2000). While the first two models overestimate bond prices, the Fan and Sundaresan model reveals an extremely good performance. When...

We present an explicit formula for European options on coupon bearing bonds and swaptions in the Heath-Jarrow-Morton (HJM) one factor model with non-stochastic volatility. The formula extends the Jamshidian formula for zero-coupon bonds. We provide also an explicit way to compute the hedging...

A lattice-based method is advanced for evaluating functionals of sequences of path-wise values of a lattice's state variable. For the Asian call valuations in this paper, the lattices discretely replicate the stochastic future states of conventionally prescribed, lognormally distributed, equity...