Given a European derivative security with an arbitrary payoff function and a corresponding set of" underlying … securities on which the derivative security is based, we solve the dynamic replication problem: find a" self-financing dynamic …-dependent options and options on assets with stochastic volatility and jumps. " …

the mean and volatility of equity returns. Our model assumes a small risk of a rare disaster that is calibrated based on … the international data on large consumption declines. We allow the risk of this rare disaster to be stochastic, which … turns out to be crucial to the model's ability to explain both equity volatility and option prices. We explore different …

to compute more complicated derivative securities …

-pricing perspective, e.g., negative skewness and excess kurtosis for asset returns, volatility 'smiles' for option prices. We perform …

We propose a nonparametric estimation procedure for continuous- time stochastic models. Because prices of derivative … securities depend crucially on the form of the instantaneous volatility of the underlying process, we leave the volatility … not rely on replacing the continuous- time model by some discrete approximation. Instead the drift and volatility …

We propose a nonparametric method for estimating the pricing formula of a derivative asset using learning networks …

impose tight upper and lower bounds on the implied volatility …

the put spread cannot be attributed to an increase in idiosyncratic risk because the correlation of stock returns … increased during the crisis. The government's collective guarantee partially absorbs financial sector-wide tail risk, which … the bailout guarantee during the crisis. The model solves the problem of how to measure systemic risk in a world where the …

synthesized by a dynamic trading strategy in a risk free asset and other securities. We contend that there is a crucial … replacement of a real security by synthetic strategies may in itself cause enough uncertainty about the price volatility of the … between a synthetic security and a real security. One form of portfolio insurance uses a trading strategy in risk free …