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Stochastic Correlation and Risk Premia in Term Structure Models

Chiarella, Carl - 2016

This paper analyzes a term structure model that allows for both stochastic correlation between underlying factors and an extended market price of risk specification. We show that significant improvement in bond fitting and portfolio performance is obtained by the model. However, the restriction...

Persistent link: https://www.econbiz.de/10012982272

Exchange Options under Jump-Diffusion Dynamics

Cheang, Gerald H. L.; Chiarella, Carl - 2009

Margrabe provides a pricing formula for an exchange option where the distributions of both stock prices are log-normal with correlated Wiener components. Merton has provided a formula for the price of a European call option on a single stock where the stock price process contains a continuous...

Persistent link: https://www.econbiz.de/10014210168

Credit derivatives pricing with stochastic volatility models

Chiarella, Carl; Chege Maina, Samuel; Nikitopoulos, … - In: International journal of theoretical and applied finance 16 (2013) 4, pp. 1-28

Persistent link: https://www.econbiz.de/10009779780

Fear or Fundamentals? Heterogeneous Beliefs in the European Sovereign CDS Market

Chiarella, Carl - 2015

This paper proposes a model for credit default swap (CDS) spreads under heterogeneous expectations to explain the escalation in sovereign European CDS spreads and the widening variations across European sovereigns following the Global Financial Crisis (GFC). In our model, investors believe that...

Persistent link: https://www.econbiz.de/10013034720

The volatility structure of the fixed income market under the HJM framework : a nonlinear filtering approach

Chiarella, Carl; Hung, Hing; Tô, Thuy-duong - 2005

Persistent link: https://www.econbiz.de/10002721773

Estimating Behavioural Heterogeneity Under Regime Switching

Chiarella, Carl - 2012

Financial markets are typically characterized by high (low) price level and low (high) volatility during boom (bust …) periods, suggesting that price and volatility tend to move together with different market conditions/states. By proposing a …

Persistent link: https://www.econbiz.de/10013098977

Heterogeneous Expectations in Asset Pricing : Empirical Evidence from the S&P 500

Chiarella, Carl - 2016

reported that the model can explain the stylized facts of financial market such as heavy tails and volatility clustering …

Persistent link: https://www.econbiz.de/10013009017

Hedge Portfolios in Markets with Price Discontinuities

Cheang, Gerald H. L. - 2008

We consider a market consisting of multiple assets under jump-diffusion dynamics with European style options written on these assets. It is well-known that such markets are incomplete in the Harrison and Pliska sense. We derive a pricing relation by adopting a Radon-Nikodym derivative based on...

Persistent link: https://www.econbiz.de/10012724447

Bootstrap Results From the State Space From Representation of the Heath-Jarrow-Morton Model

Bhar, Ram; Chiarella, Carl - Finance Discipline Group, Business School - 1996

structure of interest rates to state space form for a fairly general class of volatility specification including stochastic … variables. Estimation of this volatility function is at the heart of the identification of the HJM model. The paper develops a … the estimators. It is shown that not all combinations of the parameters of the volatility function are equally likely. The …

Persistent link: https://www.econbiz.de/10005112892

A Maximum Likelihood Approach to Estimation of Heath-Jarrow-Morton Models

Bhar, Ram; Chiarella, Carl; To, Thuy Duong - Finance Discipline Group, Business School - 2002

-deterministic instantaneous forward rate volatility. In this case the forward rate is Markovian, even if the spot rate process is not. However … the estimation of a humped forward rate volatility model for Eurodollar futures series traded on the Chicago Mercantile …

Persistent link: https://www.econbiz.de/10004984491

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