Prices of currency options commonly differ from the Black-Scholes formula along two dimensions: implied volatilities vary by strike price (volatility smiles) and maturity (implied volatility of at­the­money options increases, on average, with maturity). We account for both using Gram­Charlier...

We document a surprising pattern in market prices of S&P 500 index options. When implied volatilities are graphed against a standard measure of moneyness, the implied volatility smirk does not flatten out as maturity increases up to the observable horizon of two years. This behavior contrasts...

If pricing kernels are assumed non-negative then the inverse problem of finding the pricing kernel is well-posed. The constrained least squares method provides a consistent estimate of the pricing kernel. When the data are limited, a new method is suggested: relaxed maximization of the relative...

The efficiency of speculative markets, as represented by Fama's 1970 fair game model, is tested on weekly price index data of six Asian stock markets - Hong Kong, Indonesia, Malaysia, Singapore, Taiwan and Thailand - using Sherry's (1992) non-parametric methods. These scientific testing methods...

This working paper aims at improving the comparability of forecast quality measures of insolvency prediction studies. For this purpose, in a first step commonly used accuracy measures for categorial, ordinal and cardinal insolvency predictions are presented. It will be argued, that ordinal...

This paper demonstrates the impact of the observed financial market persistence or long term memory on European option valuation by simple simulation. Many empirical researchers have observed the non-Fickian degrees of persistence or long memory in the financial markets different from the...

This paper compares generalized method of moments (GMM) and simulated maximum likelihood (SML) approaches to the estimation of the panel probit model. Both techniques circumvent multiple integration of joint density functions without the need to restrict the error term variance- covariance...

In this paper we show the degrees of persistence of the time series if eight European stock market indices are measured, after their lack of ergodicity and stationarity has been established. The proper identification of the nature of the persistence of financial time series forms a crucial step...

This paper estimates commercial banks’ efficiency in three relatively homogenous groups of countries with different level of economic development and different involvement in the process of European integration. The first group consists of Portugal and Greece, the second group is represented...

The literature on corporate credit risk modeling for privately-held firms is scarce. Although firms with unlisted equity or debt represent a significant fraction of the corporate sector worldwide, research in this area has been hampered by the unavailability of public data. This study is an...