We provide a monotonic transformation of an initial diffusion with a level-dependent diffusion parameter that yields a second, deterministic parameter process. Altering the diffusion parameter while maintaining the original Brownian motion at the expense of the drift can be viewed as a...

This paper studies the implications of absence of arbitrage in economies where: (i) trade takes place in transaction time, (ii) there is a single state variable whose transaction-time price path is binomial, (iii) there are riskfree bonds with calendar-time maturities, and (iv) the relation...

A number of inefficiencies in the art market stress the fact that art remains a highly risky investment. The art market is characterized by high illiquidity, inefficient market information, high transaction costs, long transaction time and the absence of a hedging mechanism. Therefore, unlike...

This paper provides a new paradigm for thinking about performance fees. Closed-form expressions for the value and expected value of the performance fee for a popular generic structure are presented. The expected fee is decomposed into earned and unearned components. Suggestions for reducing the...

This paper studies the structure of stock market crashes, rallies, their jump arrival rates, and extremes. Large market moves are characterized in a pure-jump modeling framework. Based on both raw and devolatized returns, it is shown empirically that crashes are more severe in intensity than...