This paper examines the static and dynamic accuracy of interest rate option pricing models in the U.S. dollar interest rate cap and floor markets. We evaluate alternative one-factor and two-factor term structure models of the spot and the forward interest rates on the basis of their...

This paper examines the static and dynamic accuracy of interest rate option pricing models in the U.S. dollar interest rate cap and floor markets. Alternative one-factor and two-factor term structure models of the spot and the forward rate are evaluated on the basis of their out-of-sample...

We investigate the interaction of volatility smiles and liquidity in the euro (not;) interest rate option markets, using daily bid and ask prices of interest rate caps/floors. We find that liquidity variables have significant explanatory power for both curvature and asymmetry of the implied...

This paper examines the convexity bias introduced by pricing interest rate swaps offthe Eurocurrency futures curve and the market's adjustment of this bias in prices over time. The convexity bias arises because of the difference between a futures contractand a forward contract on interest rates,...

This paper examines the static and dynamic accuracy of interest rate option pricing models in the U.S. dollar interest rate cap and floor markets. We evaluate alternative one-factor and two-factor term structure models of the spot and the forward interest rates on the basis of their...

We address three questions relating to the interest rate options market: What is the shape of the smile? What are the economic determinants of the shape of the smile? Do these determinants have predictive power for the futures shape of the smile and vice versa? We investigate these issues using...

We address three questions relating to the interest rate options market: What is the shape of the smile? What are the economic determinants of the shape of the smile? Do these determinants have predictive power for the future shape of the smile and vice versa? We investigate these issues using...

This paper studies operational risk in the hedge fund industry using a sample of 444 due diligence (DD) reports. Many funds suffer from operational problems, ranging from limited disclosure on past legal or regulatory offenses and the failure to use a major auditing firm to the frequent use of...

Using a complete set of the SEC filing information on hedge funds (Form ADV) and the TASS data, we develop a quantitative model called the ω-Score to measure hedge fund operational risk. The ω-Score is related to conflict of interest issues, concentrated ownership, and reduced leverage in the...

Using a complete set of the SEC filing information on hedge funds (Form ADV) and the TASS data, we develop a quantitative model called the Eacute;-Score to measure hedge fund operational risk. The Eacute;-Score is related to conflict of interest issues, concentrated ownership, and reduced leverage...