We study the lead–lag dependence between aggregate credit spreads and equity prices as well as implied equity volatility, which is important for proper credit risk assessment. Our analysis includes daily quotes of the iTraxx Europe index, the Dow Jones Euro Stoxx 50 index, and the Dow Jones...

We determine the minimal entropy martingale measure for a general class of stochastic volatility models where both price process and volatility process contain jump terms which are correlated. This generalizes previous studies which have treated either the geometric Lévy case or continuous...

The main contribution of this paper is to identify the strong predictive power of the relative concentration of depth provision, rather than volume of orders, over volatility. To this end, we propose a new measure, relative liquidity (RLIQ), which extracts information from a limit order book...

We propose an approach for pricing and hedging weather derivatives based on including forward looking information about the temperature available to the market. This is achieved by modeling temperature forecasts by a finite dimensional factor model. Temperature dynamics are then inferred in the...

A Margrabe or exchange option is an option to exchange one asset for another. In a general stochastic volatility framework, by taking the second asset as a numeraire, we derive pricing as well as second order approximative pricing formulae for Margrabe options. This can only be done under...