A fast and accurate method for pricing early exercise and certain exotic options in computational finance is presented. The method is based on a quadrature technique and relies heavily on Fourier transformations. The main idea is to reformulate the well-known risk-neutral valuation formula by...

In this paper we recover the Black-Scholes and local volatility pricing engines in the presence of an unspecified, fully stochastic volatility. The input volatility functions are allowed to fluctuate randomly and to depend on time to expiration in a systematic way, bringing the underlying theory...

For deals denominated in a single currency, different collateralization schemes imply different accrual rates for funds posted as collateral, so that we can end up with different current accounts that accrue at different rates and their corresponding discount factors. In this paper we examine...

Any demand equation satisfying Lau’s (1982) Fundamental Theorem of Exact Aggregation and is 0 homogeneous in prices and income will have a Gorman (1981) functional form for each income term. This property does not depend on symmetry or adding up. The implications of this result are...

This paper provides a simple proof of the result that if a production function is homogeneous, displays non-increasing returns to scale, is increasing and quasiconcave, then it is concave. If the function is strictly quasiconcave or one-to-one, homogeneous, displays decreasing returns to scale...

In this paper, money demand models using narrowly- and broadly-defined monetary aggregates have been tried to be constructed for the Turkish economy. Using some contemporaneous co-integration estimation techniques for the 1987-2007 period with quarterly data, our findings indicate that for the...

In this paper we will study the influence of qualitative variables on the unit root tests for stationarity. For the linear regressions involved the implied assumption is that they are not influenced by such qualitative variables. For this reason, after we have introduced such variables, we...

We present a simplified approach to the analytical approximation of the transition density related to a general local volatility model. The methodology is sufficiently flexible to be extended to time-dependent coefficients, multi-dimensional stochastic volatility models, degenerate parabolic...

People tend to think by analogies and comparisons. Such way of thinking, termed coarse thinking by Mullainathan et al [Quarterly Journal of Economics, May 2008] is intuitively very appealing. We develop a new option pricing model based on the idea that the market consists of coarse thinkers as...

We propose a numerical procedure for the pricing of financial contracts whose contingent claims are exposed to two sources of risk: the stock price and the short interest rate. More precisely, in our pricing framework we assume that the stock price dynamics is described by the Cox, Ross...