This paper formulates and analyzes a dynamic optimization problem of bond portfolios within Markovian Heath-Jarrow-Morton term structure models. In particular, we investigate optimal yield curve strategies analytically and numerically, and provide theoretical justification for a typical strategy...

This paper proposes a new approach to style analysis by utilizing a general state space model and Monte Carlo filter. In particular,We regard coefficients of style indices as state variables in the state space model and apply Monte Carlo filter as estimation method. Moreover, an empirical...

This paper proposes a new hedging scheme of European derivatives under uncertain volatility environments, in which a weighted variance swap called the polynomial variance swap is added to the Black-Scholes delta hedging for managing exposure to volatility risk. In general, under these...

This paper proposes a method to price convertible bonds with credit risk using Duffie-Singleton approach to handle credit risk. As such it also provides a method to replicate convertibles by trading common stocks and corporate bonds of the issuing company. Empirical comparison with existing...

We propose a new method to value convertible bonds(CBs). In particular, we explicitly take default risk into consideration based on Duffie-Singleton(1999), and provide a consistent and practical method for relative pricing of securities issued by a firm such as CBs, non-convertible corporate...

This paper shows the analytical solution of a bond price with postponement of redemption by considering the special case of Ikeda and Kobayashi (2007). We can derive the solution by solving a Wiener-Hopf type integral equation, and such derivation does not have an example in others. Therefore...

This paper is written as a tribute to Professors Robert Merton and Myron Scholes, winners of the 1997 Nobel Prize in economics, as well as to their collaborator, the late Professor Fischer Black. We first provide a brief and very selective review of their seminal work in contingent claims...

This study examines life-cycle optimal consumption and asset allocation in the presence of human capital. Labor income seems like a "money market mutual fund" whose balance in one or two years is predictable but a wide dispersion results after many years, reflecting fluctuations in economic...

This paper explores the impact of publicly listed parent/subsidiary pairs on the pricing and volatility of companies' shares. We construct a noisy rational expectations equilibrium model in which a parent and its subsidiary company are both publicly listed. Two classes of traders participate in...

This paper is a companion paper to "Publicly Listed Parent/Subsidiary Pairs: Benchmarking to TOPIX and Market Distortion," by the same authors. The purpose of this separate piece is to give a more intuitive and non-mathematical illustration of the structure of the model, its assumptions, and...