We put forward a new option pricing formula based on the notion that people tend to think by analogies and comparisons. The new formula differs from the Black Scholes formula due to the appearance of a parameter in the formula that captures the risk premium on the underlying. The new formula,...

In this paper we study relations between various segments of the Russian financial market (GKO market, currency market, interbank loans market and stock market). We pay special attention to the GKO market, which is remarkable for its volume and significance. We consider relations of the GKO...

This paper uses regression analysis to compare the market pricing of the default risk of banks to that of other firms. We study how CDS traders discriminate between banks and other type of firms and how their judgement changes over time, in particular, since the start of the recent financial...

This article analyzes the role of liquidity in the sovereign credit default swap (CDS) market. We employ a continuous-time specification to incorporate illiquidity as an additional pricing factor of default swap contracts for the most developed economies. The illiquidity discount process is...

This study examines short horizon currency futures returns. Expectations hypothesis or risk neutrality assumes an efficient market with no risk premium, and therefore no predictor for futures returns. Using the British, German, Swiss, Japanese, and Canadian currencies as well as pooled currency...

Turkdex is one of the promising derivative exchanges with its innovative products and competitive strategy. This paper focuses on the short term interest rate (STIR) futures contract specifications of developed and emerging markets and presents a comparative study for the Turkdex STIR futures...

In this paper we model country-specific equity market return and association between country-specific equity market volatility and that of the world market in the downside and conventional asset pricing frameworks. For this a Factor- ARCH type process is adopted where world market risk (beta) is...

Following a brief review of the recent history of GDP-linked instruments, this paper proposes a set of tools to examine the quantitative properties of GDP-linked warrants. It argues that trigger conditions should be clearly identifiable and payment amounts easily calculable. Based on a design...

Can the liquidity premium in asset prices, as documented in the exchange-traded equity and bond markets, be generalized to the over-the-counter (OTC) derivative markets? Using OTC euro (euro;) interest rate cap and floor data, we find that illiquid options trade at higher prices relative to...