We propose a criterion for portfolio selection, implied excess Sharpe ratio. The implied excess Sharpe ratio is intended as an excess Sharpe ratio (versus the underlying stock) that investors can expect to enjoy from portfolios that include options and is a useful ex ante indicator that can be...

A new type of bank regulatory capital, known as contingent capital, has emerged in tandem with discussions on the BASEL III regulatory framework but there is a lack of consensus on a standard valuation approach among those proposed so far. We think that the practical solution is to be able to...