We extend a modular pricing framework proposed by Ericsson and Reneby (1998, 2000, 2001) to derive a valuation formula for calls on leveraged equity, similar to Toft and Prucyk (1997). In contrast to their derivation via partial differential equations, we choose a more elegant probabilistic...

We consider optimal consumption and (strategic) asset allocation of an investor with uncertain lifetime. The problem is solved using a multi-stage stochastic linear programming (SLP) model to be able to generalize the closed-form solution obtained by Richard (1975). We account for aspects of the...

This paper reports the findings of analyses, conducted to identify regularities and differences underlying various aspects of activity-travel patterns across a set of cities, regions in the world. Activity-travel patterns, derived from activity diary data collected in Portland (USA), Midlands...

In this paper, we analyse options that are bought or sold by the company on whose stocks these options are written, leading to dilution and anti-dilution effects. We provide valuation equations for the European versions of such options, and discuss conditions for existence and uniqueness of...

The effects of a Tobin tax on foreign exchange markets have long been disputed. We present an experiment with currency trading on two markets, where either none, one, or both markets are taxed. Our results confirm the hitherto undisputed issues: a tax reduces trading volume, shifts market share...

We describe existing and potential financial applications of the Mahalanobis distance. After a short motivation and a discussion of important properties of this multivariate distance measure, we classify its applications in finance according to the source and nature of its input parameters....

We derive no-arbitrage bounds for expected excess returns to generate scenarios used in financial applications. The bounds allow to distinguish three regions: one where arbitrage opportunities will never exist, a second where arbitrage may be present, and a third, where arbitrage opportunities...